An eight-member group of ministers has been set up to study the goods and services tax (GST) rates applicable on Covid-19-related materials, the finance ministry said on Saturday. The panel has been formed as states failed to reach an agreement on the contentious issue of fixing a zero rate of tax on all Covid-related products.
The Centre refused to relent, arguing that the tax waiver issue was devilishly complicated as it would have to cover a barrel-load of items across the value chain to be really effective, ensuring that no manufacturer was denied an input tax credit just because some product was left out of the ambit.
The high-powered group includes finance ministers of eight states — Meghalaya, Maharashtra, Goa, Odisha, Telangana, Gujarat, Uttar Pradesh and Kerala. Meghalaya chief minister Conrad Sangma, who also holds the state’s finance portfolio, is the group’s convenor.
The panel will examine the need for GST concession/exemption and make recommendations on (i) Covid vaccines, drugs and medicine and testing kits; (ii) medical grade oxygen, pulse oximeters, hand sanitisers, oxygen therapy equipment such as concentrators, generators and ventilators, PPE kits, N 95 masks, surgical masks, temperature checking equipment; and (iii) any other items required for Covid relief.
Most of the Covid-19-related items attract a GST of 12 per cent, except for vaccines, which attract a tax of 5 per cent.
Ritesh Kanodia, partner, Dhruva Advisors LLP, said, “Whether or not vaccines should be included in the exemption list is also to be seen from the perspective of whether the exemptions will result in the passing of any effective benefit to the end consumer. As far as free vaccine distribution is concerned, the states are already bearing the cost. If an exemption is granted, they will also lose their share of revenue to the extent of such exemption.
‘‘However, the flip side is that the Center may also end up compensating the state if their revenues do not grow by 14 per cent year-on-year. Also, in terms of revenue sharing, states will further lose 42 per cent revenue from the GST collections by the Centre,’’ Kanodia added.
“The panel has been directed to submit the report by June 8, but the final decision could be delayed as the date for next council meeting has not been announced,” Shweta Walecha, director at Lakshmikumaran & Sridharan Attorneys, said.