The Centre and state governments could not reach a consensus in a Goods and Services Tax Council meeting on Friday, on whether to provide tax relief on items, such as vaccines and other medical supplies needed to tackle the Covid-19 crisis.
The matter has been now been referred to a group of ministers, which will submit its report on June 8, the finance ministry said in a release.
“Will these benefits eventually be passed over to the end-user...The patient, the citizen...On that there were differing views,” Finance Minister Nirmala Sitharaman said after the meeting, The Indian Express reported. “So I suggested it should be taken to GoM [group of ministers] and then take a view.”
The council, however, decided to exempt the Integrated Goods and Services Tax, or IGST component, on the import of a number of medical equipment, vaccines and other coronavirus relief material till 31 August. Apart from vaccines, these items include medical oxygen, concentrators and other oxygen storage and transportation equipment and certain diagnostic markers test kits, the finance ministry said.
The exemption has also been extended to vials of Amphotericin-B, the drug used to treat mucormycosis, or “black fungus”, a post-Covid complication.
So far, these goods were exempted from IGST only when these goods were imported “free of cost” for free distribution. However, now the exemption will be applicable even if they are imported on a payment basis, for donating to the government or on recommendation of state authority to any relief agency.
Among other decisions, the Centre proposed market borrowing of Rs 1.58 lakh crore to compensate states for the goods and services tax shortfall through back-to-back loans, like last year. But several states expressed discontent, suggesting it was an underestimation of projected revenue losses.
The Centre has pegged the GST compensation requirement at Rs 2.7 lakh crore for the financial year 2021-’22, of which Rs 1.1 lakh crore is expected to be met through cess collection. Like last year, revenue growth of 7% has been assumed to forecast the shortfall and borrowing requirement. However, the Centre and states are not on the same page on the matter of revenue growth estimation.
“Question of consensus is not there,” Kerala Finance Minister KN Balagopal told The Indian Express. “The 7% 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 is not correct.”
Punjab Finance Minister Manpreet Singh Badal and his Chhattisgarh counterpart TS Singh Deo also expressed their disagreement with the Centre’s projections.
The state finance ministers said that a special meeting will be held to take a final decision on GST compensation. However, there was no such mention in the official release of the Union finance ministry.