Some states are expected to seek an extension of compensation by five years to implement the new system.
The crucial meeting of the GST Council to increase tax exemption on 11 COVID-19 drugs and review tax rates of over 4 dozen items like oncology medicine and coconut oil began in Lucknow on Friday.
The 45th meeting of the GST Council, chaired by Finance Minister Nirmala Sitharaman and chaired by the Finance Ministers of the states, is the first physical meeting since the onset of the COVID-19 pandemic. The last such meeting was held 20 months ago on 18 December 2019.
There is no provision for video conferencing in Friday’s meeting and finance ministers of almost all the states except Gujarat are attending the meeting.
It will consider a proposal to extend the existing concessional tax rate structure on anti-coagulants such as amphotericin B, tocilizumab, remdesivir and heparin from the current September 30 to December 31, 2021.
The tax rate on amphotericin B, tocilizumab, was reduced to ‘zero’ in June 2021, while remdesivir and heparin were reduced to 5 per cent.
The council will also discuss on Friday a proposal to reduce GST on seven more medicines from 12 per cent to 5 per cent by December 31, 2021.
These are itolizumab, posaconazole, infliximab, bamlanivimab and atacevimab, casirivimab and imdevimab, 2-deoxy-D-glucose and favipiravir.
Also, taxing petrol and diesel under a single national GST tax.
The demand for introducing a new tax system on the basis of production capacity instead of actual production for industries such as brick kilns, gutkha and pan masala, and sand mining in some states, including the host state Uttar Pradesh, may also be considered. For at least one or two of these sectors. Incidents of tax evasion have been quite rampant in these areas.
Some states, including Kerala, are expected to seek an extension of the compensation period of five years to implement the GST, which expires next June and their revenues since the tax was introduced in 2017. Raises concerns about obstacles.
Ms Sitharaman had earlier promised states that a separate meeting of the council would be held to discuss issues related to compensation. Informed sources said that though such a meeting may take place at a later stage also, talks between the Center and the states will start from Friday’s agenda item on compensation.
The council is also likely to consider Sikkim’s request to allow levying of a small cess on power generation and pharmaceutical products to raise around Rs 300 crore and tide over the COVID-induced financial stress.
A ministerial group of the council examined the state’s request and urged the Center to give some additional funds to the smaller state. Kerala Finance Minister KN Balagopal, who was part of the group, however, submitted a dissent note, stating that it reflects the devolution of taxation powers to the Center and other states facing a similar crisis in future. can.
The recent decision of the Supreme Court to deny input tax credit for services used in making products with inverted duty structure may also come up for discussion, though the issue is unlikely to be resolved.
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