GST Council To Discuss Tax Rate On COVID Essentials, Compensation To States

The Council, which is headed by Union Finance Minister Nirmala Sitharaman and includes representatives of all states and Union territories, is meeting for the first time in nearly eight months.

The GST Council is likely to discuss on Friday a reduction in the tax rate on Covid medicines, vaccines, and medical equipment, as well as means to make up for the shortfall in revenues, promised to states. Ahead of the first meeting of the top decision-making body, finance ministers of eight states ruled by non-BJP and like-minded parties -- Rajasthan, Punjab, Chhattisgarh, Tamil Nadu, Maharashtra, Jharkhand, Kerala, and West Bengal -- have devised a joint strategy to press for a zero tax rate on Covid essentials, sources said. The Council, which is headed by Union Finance Minister Nirmala Sitharaman and includes representatives of all states and Union territories, is meeting for the first time in nearly eight months. Besides discussion on tax rates, the Council may also deliberate on the estimated Rs 2.69 lakh crore that states need to be provided as per the promise in 2017 to make good any loss in revenue they suffer because of giving up their right to levy VAT and other taxes. Sources said the Fitment Committee on GST rates, comprising tax officers of Centre and states, has also given its report to the Council listing out the pros and cons of waiver and zero-rating of Covid vaccines, drugs and other equipment. Exempting final products from GST would deny manufacturers the option to claim the benefit of the input tax credit on raw materials and hence not much benefit accrues to consumers. In 2018, the Council, following demands from various women's organisations, had exempted GST on sanitary napkins from an earlier rate of 12 per cent. However, not much of the rate cut benefits accrued to consumers as manufacturers could not claim the benefit of taxes paid along the supply chain.