Finance Minister Nirmala Sitharaman chairs the 43rd GST Council meetingGST Council Meet underway: Finance Minister Nirmala Sitharaman chairs the 43rd good and services tax (GST) council meeting on Friday, May 28, through video conferencing. According to the Ministry of Finance, the meeting is attended by Anurag Thakur, Minister of State for Finance, along with the finance ministers and the senior officials of the states and union territories. The meeting is likely to hold discussions on states seeking a cut in GST rates on the essential COVID-related supplies such as medicines, vaccines, etc.Besides discussions on the tax rates, the GST Council is also expected to discuss the compensation shortfall to the states amid the second wave of the COVID-19 pandemic. The Ministry of Finance announced that Ms Sitharaman will address a media briefing today at 7 pm (tentatively) to discuss the outcomes of the 43rd GST council meet. FM Smt @nsitharaman is chairing the 43rd GST Council meeting in the presence of MoS @ianuragthakur via video conferencing in New Delhi.Finance Ministers of States & UTs and Senior officers from Union Government & States are also present in the meeting. pic.twitter.com/qMRVyFZCWi— Office of Mr. Anurag Thakur (@Anurag_Office) May 28, 2021 Compensation to states amid revenue shortfallThe GST council meet today is held by the authorities after a gap of almost eight months. The previous meeting – the 42nd GST Council meet, was conducted last year, on October 5, 2020.At its last meeting, the Council decided the extension of levying of compensation cess beyond the transition period of five years for the states, to meet the revenue gap. The central government also announced that the shortfall amount was increased to Rs 1.10 lakh crores from Rs 97,000 crores under the borrowing option.Finance Minister Nirmala Sitharaman had announced that 21 states chose the first borrowing option for compensation of revenue shortfall due to the GST implementation. Ms Sitharaman had clarified that the central government is not denying compensation to any state but those states which have not chosen any borrowing option, will have to borrow from the market.Under the GST law, states were guaranteed to be compensated bi-monthly to make up for the revenue shortfall in the first five years of the GST implementation, starting from July 1, 2017. This was done as states lost autonomy over the indirect taxes due to the rollout of the GST system. The revenue shortfall is calculated assuming a 14 per cent annual growth in GST collections of states, over the base year of 2015-16. Amid the second wave of the pandemic and the induced economic slowdown, GST collections declined, resulting in states still continuing to face a shortfall in revenue. Tax cut on COVID-related essentialsRecently, Punjab finance minister Manpreet Singh Badal in a letter written to Finance Minister Nirmala Sitharaman had asked the central government to consider the GST exemption on essential COVID-related related items such as face masks hand sanitisers, gloves, temperature scanners, PPE Kits, oximeters, ventilators, and other such essential medical supplies. He specified that these items attract a basic customs duty of 20 per cent and a GST of up to 18 per cent.Additionally, a 10 per cent social welfare surcharge is levied on such items. As IGST is charged on the taxable value, which includes import duties, the effective burden exceeds by another 2-3 per cent, added the Punjab finance minister.Earlier this month, the Finance Minister virtually ruled out exempting COVID-19 medicines, vaccines, as well as oxygen concentrators from the ambit of GST, stating that such an exemption will make the lifesaving essentials costlier for consumers, as the manufacturers will not be able to offset the taxes paid on inputs.Presently, domestic supplies and commercial imports of vaccines attract a five per cent GST, while the COVID-19 drugs and oxygen concentrators attract a 12 per cent levy. With regard to the issue of compensation payable to states, the central government has estimated the shortfall at ₹ 2.69 lakh crore.Also Read: GST Council To Discuss Tax Rate On COVID Essentials, Compensation To StatesMeanwhile, budget 2021-22 assumed a 17 per cent growth in GST revenues, translating into monthly gross GST revenue of Rs 1.1 lakh crore. The GST Council is the statutory body that takes decisions regarding the issues of threshold limit for the applicability of the tax, and the limit for dual control between the central government and the states.
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