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Published on: June 3, 2021, 3:57 p.m.
Rift wide open between Centre and opposition
  • Sitharaman: will take a final call

By Rakesh Joshi. Executive Editor, Business India

Politics reigned supreme at the 43rd meeting of the Goods & Services Tax Council even on the issue of granting further relief for Covid-related items, such as vaccines and medical equipment. Currently, domestic supplies and commercial imports of vaccines attract a 5 per cent GST, while Covid drugs and oxygen concentrators attract a 12 per cent levy. While finance ministers of Opposition-led states demanded an outright waiver, their counterparts in states ruled by the Bharatiya Janata Party went by the centre’s stand.

The matter has now been referred to a Group of Ministers, which will submit its recommendations by 8 June. The only relief came by way of exempting of Covid-related goods for donation from GST till 31 August. Amphotericin B, used for treating black fungus, has also been exempted.

States have been demanding concessions and zero rating on Covid-related relief items. “Many states asked for zero rating, they are proposing the lowest rate of 5 per cent,” Kerala’s Finance Minister K.N. Balagopal told the reporters. “The government is saying that if it is zero rated, then there is no provision in the law per se and at zero tax slab, there will be no input tax credit. Many states said that it is a difficult situation of the pandemic and need not go by technicalities and if needed, then we can go for an ordinance also, because, if there is no legal provision that way, there can be an ordinance then”.

Differing views

Explaining the Centre’s stand, Finance Minister Nirmala Sitharaman said: “It is one thing to rush to say – do this, it will benefit the common man. But when the technical, fitment and law committees go into the details, you realise that that could have collateral impact on many others. I am not talking about the revenue generation aspect, but how many other items will get included in it as a result of which, how you are going to implement it”. She went on to add: “Will these benefits eventually be passed over to the end-user – the patient, the citizen? On that there were differing views, so I suggested it should be taken to GoM and then take a view… as a council, we are responsible to see how it reaches the common man… the GoM will come back to us and we will take a final call”.

The council, which met for the first time after October 2020, discussed the issue of compensation payments, for which states raised concerns about the 7-per cent revenue growth assumption. A special session will be called soon for discussing compensation issues and the extension of guaranteed compensation period beyond June 2022.

The two sides also could not reach a consensus on the set of projections made for meeting the compensation shortfall this fiscal. An estimated amount of Rs1.58 lakh crore is likely to be borrowed through back-to-back loans to meet the promised compensation requirement for states under GST, based on the assumption that revenue growth will be 7 per cent. Sitharaman said the same formula as last year will be adopted this year too. “Rough estimate is that Centre would have to borrow Rs1.58 lakh crore and pass it on as back-to-back loans to the states.”

Three Opposition-led state FMs, however, said that there is no unanimity on these estimates and that they will take it up in the special meeting that will be called for this purpose. “There wasn’t unanimity on the compensation issue. There’s a difference of opinion on how they have reached the figure of Rs1.6 lakh crore. Final decision will happen in the meeting, which will be called on compensation-related issues,” says Punjab’s Manpreet Singh Badal. “The 7 per cent growth estimate will not be attainable because now this month there is not much growth (in revenues), at least in time of lockdown. That’s why that expectation (of 7 per cent) is not correct,” Balagopal added. 

The council provided relief to small GST taxpayers through an amnesty scheme for late return filers. Late fee for non-furnishing of GSTR-3B for July 2017-April 2021 has been capped at Rs500 per return for those taxpayers who did not have any tax liability. For those with tax liabilities, a maximum Rs1,000 per return late fees would be charged, provided such returns are filed by 31 August. Filing of annual returns for 2020-21 for taxpayers with aggregate turnover of up to Rs2 crore has been made optional. 

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