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GST council may cut rates on oxygen and Covid essentials

By Saima Siddiqui 
Updated Date
GST council may cut rates on oxygen and Covid essentials

New Delhi : The Goods and Services Tax Council might consider slashing the GST rate from 12% to 5% on Covid related gears such as medical oxygen, pulse oximeters and testing kits for a limited period to help lower the cost of treating Coronavirus, in its virtual meeting on Friday.

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However, the federal indirect tax body is likely to leave untouched the tax rate on vaccines and medicines as these attract only 5%, the merit rate that covers most of the essential goods, said a person aware of discussions between the Union and state governments.

A panel of experts has studied suggestions from state governments and other stakeholders, and proposed that any relief should take the form of a 5% rate rather than an exemption, or special rate or zero rating of the product, which may distort the GST structure.

The panel has also proposed that revised tax rate on oxygen concentrators and generators, and pulse oximeters be valid till the end of July and on Covid testing kits till the end of August, said a source. The panel, however, did not recommend any change in the tax rate on vaccines because it is already at 5% and the taxes paid on raw materials and services could be adjusted against the tax liability on the vaccine.

Given that treatment protocols keep changing, no tax changes are proposed for medicines, most of which are already in the 5% slab. Given the desperation of state governments to reduce costs in the midst of a raging pandemic, these proposals could undergo some changes when the Council discusses them on Friday.

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The Council is also expected to widen the list of medical supplies for Covid relief that are eligible for exemption from import duties and integrated GST when imported into the country for free distribution or donation. However, the tax rate on hand sanitisers, masks, personal protection gear and ambulances will remain unchanged as these are in the 5% slab, with alternatives available.

The Centre last month exempted basic customs duty and agriculture cess on items like medical oxygen, oxygen generators and concentrators, ventilators and cryogenic transport tanks. Waiver of customs duty and IGST for certain diagnostic kits and reagents have also been announced for a limited period. It also reduced IGST on imported oxygen concentrators meant for personal use from 28% to 12% for a limited period.

However, the Delhi high court last week said that imposition of 12% IGST on oxygen concentrators for personal use or those received as gifts was “unconstitutional”. Experts said this may weigh on the Council’s deliberations.

One can expect that the Council may further reduce the rate or grant exemption to imports of oxygen concentrators for personal use for a limited period, said Niraj Bagri, partner at Dhruva Advisors LLP, a consultancy

The GST Council is expected to discuss alleged Kafkaesque bureaucratic decisions to enforce compliance of goods and services tax, which may have serious implications for the industry, during the council’s meeting on Friday.

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Punjab finance minister Manpreet Singh Badal has told Union finance minister Nirmala Sitharaman that bureaucratic decisions, ranging from restriction of input tax credits to cancellation of registration, and moving compliance away from the political oversight of the GST Council, set a dangerous precedent by delegating excessive powers to bureaucrats.

Punjab will not incorporate such legal changes in state legislation in unless they are cleared by the council, he said.

“GST is being increasingly perceived to be causing excessive harassment and arbitrariness (freezing of productive assets of businesses, suspension of registrations and denial of eligible tax credits) and moving away from a fair and non-adversarial tax system that forms the foundation for a progressive tax regime,” Mr Badal wrote in his letter to Sitharaman on Monday.

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