A slew of coronavirus pandemic-related decisions were taken at the 43rd GST Council meeting, chaired by Finance Minister Nirmala Sitharaman and comprising state finance ministers, on Friday.
The GST Council on Friday left taxes on Covid-19 vaccines and medical supplies unchanged but exempted duty on import of a medicine used for treatment of black fungus.
A group of ministers will deliberate on tax structure on the vaccine and medical supplies, Finance Minister Nirmala Sitharaman told reporters after a meeting of the GST Council.
The GST Council exempted levy of IGST on import of Amphotericin-B, which is used for the treatment of black fungus.
Currently, vaccines attract 5 per cent GST. Sitharaman said the Council decided to continue a waiver of IGST on free Covid-19 related supplies imported from abroad.
“The Council has decided to exempt the import of relief items even if they are purchased if they are meant for donations to State governments. This exemption has been extended till August 31. So far, the IGST exemption was available only when you were importing free of cost,” said FM.
“The ad hoc exemption has been extended till August 31. While that applied to imports received for free for donation, the decision is that if somebody wants to purchase these things from abroad and donate them in the country, they can also avail the exemption,” said Revenue Secretary Tarun Bajaj.
Centre will borrow Rs 1.58 trillion in FY22 to compensate states for loss of revenue from GST, added FM.
“On GST compensation cess, same formula as last year to be adopted this year too. Rough estimate is that Centre will have to borrow Rs 1.58 trillion and pass it on to states,” said Sitharaman.
A special session of the Council will be held soon to consider extending the five-year GST shortfall compensation period to states beyond 2022, she said.
“We are on the last of the five years of GST compensation to states. I have assured the members that there will be a special session only to discuss that one agenda on how long the compensation cess will be collected beyond July 2022,” said Finance Minister.
“On compensation, we have told the Council if we adopt the same formula as last year, the gap is about Rs 1.58 trillion at a macro level. Unlike last year, when there was a complete lockdown, this time, the economy is not suffering as much. Even if we manage to collect Rs 1.1 trillion per month, we will have a deficit of about Rs 1.5 trillion. This deficit may go down to Rs 1.25 trillion if collections improve to Rs 1.15 trillion a month,” said Bajaj.
The borrowing amount would be retained at Rs 1.58 trillion to ensure that the states get the residual dues from last year to that extent, added Bajaj.
She also announced an amnesty scheme for those who missed out on GST payment. Late fee has been reduced for past period and also rationalised for future for small taxpayers, said FM.
“One of the biggest decisions today is reduction of compliance burden of small taxpayers and medium-sized taxpayers. Late fee, amnesty-related matters have also been decided upon. To provide relief to small taxpayers, an amnesty scheme has been recommended for reducing late fee payable in these cases. Taxpayers can now file their pending returns and avail the benefits of this amnesty scheme with reduced late fees. Late fees have also been rationalised. The rationalised late fee and the decision to reduce the maximum amount of late fee for small taxpayers will come into effect for future tax periods. This will provide a long term relief to small taxpayers,” said Sitharaman.
“Annual return filing has also been simplified. The Council has recommended amending the CGST Act to allow for self-certification of reconciliation statements, instead of getting it certified by chartered accountants. The annual return filing will continue to be optional for FY21 for small taxpayers, having a turnover less than Rs 2 crore while reconciliation statements for 2020-21 will be furnished only by those taxpayers whose turnover is Rs 5 crore or more,” added Sitharaman.
The Council, which met for the first time in nearly eight months, held the meeting via video conferencing. While referring to the suggestions of the fitment committee put before the Council, Sitharaman announced a group of ministers to submit a report within ten days, before 8 June, so that “if there are any further reductions that need to be done will be done”.
GST Council felt that this is not the appropriate time for correction in Inversion duty, so this remains where it is, added Sitharaman.
“As always, the duties and responsibilities of the GST Council secretariat are to draw the attention of the Council to the inversion in duty structures that results not in revenues being generated, but refunds being given,” said Sitharaman.
Sitharaman also weighed in on the much-debated issue of payment to Covid vaccine manufacturers.
The Rs 4,500 crore paid to the two vaccine manufacturers was advance payments for supplies till July. Those are anyway being given to the states only. The Centre doesn’t actually go about doing vaccination, says Finance Minister Nirmala Sitharaman.
The Covid vaccine is being purchased by the Centre and the states and the GST is coming back to the Centre and the states. And it is almost the same amount that is coming back, said Bajaj.
When asked about any stimulus for businesses affected by the second wave of coronavirus, Sitharaman said: “We are getting inputs. We need to take a call on where the impact is. That process of consulting states and the Industry is going on. We have not taken any final call on it.”
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