Union Finance Minister Nirmala Sitharaman will chair the 43rd Goods and Services Tax (GST) Council meeting via video conferencing at 11 am on May 28.
The GST Council is likely to discuss key issues including compensation to states, tax waivers on various medicines, medical devices, and health services amid the second wave of the COVID-19 pandemic, according to reports. Lowering GST rates for two-wheelers and bringing natural gas into the indirect tax fold are also likely to be on agenda.
The GST Council’s meeting, the first this year, comes at a time when India is reeling under the second wave of coronavirus infections that have derailed the country’s economic recovery. Though the council is required to meet once every quarter, the last meeting was held in October last year.
The issues of compensation to states and GST on essential medical supplies are expected to dominate discussion at the meeting given the pandemic situation.
Compensation to states
A greater compensation to states given the shortfall in their revenue incomes is expected to be decided at the meeting. According to an ANI report, states want an extension of the GST compensation beyond July 2022 as economic uncertainty continues in the wake of COVID-19.
States were promised compensation for five years after GST implementation in July 2017 to make up for revenue shortfall, if any. This was done as states lost autonomy over indirect taxes due to the GST rollout.
GST on medical essentials
As the pandemic has led to an uptick in the demand for medical essentials, several states have sought GST rate cuts on essential COVID-19 supplies. In fact, Punjab Finance Minister Manpreet Singh Badal has asked the Centre to consider GST exemption on hand sanitisers, face masks, gloves, PPE Kits, temperature scanners, oximeters, ventilators, and the likes.
Recently, Sitharaman had clarified that doing away with the 5 percent GST on the vaccines will negatively impact the prices as "manufacturers would be denied input tax credit who will, in turn, pass on this to the consumers as a cost".
Inverted Tax Structure
The inverted duty essentially refers to tax rates on inputs being higher than those levied on finished products. Several states have said that a course correction is required in this regard, particularly in sectors such as fertiliser, steel utensils, solar panels, tractors, tyres, electrical transformers, pharma, textile, cloth and railway locomotives.
GST on two-wheelers
The council may also consider lowering of GST rate of 28 percent on two-wheelers to give a boost to its sales affected during the pandemic.
Union Minister of State for Finance Anurag Thakur, Finance Ministers of states and Union Territories, and senior officers from the Union government and states will join the virtual meeting, Sitharaman’s office said in a tweet.