Union finance minister Nirmala Sitharaman will chair the first Goods and Services Tax (GST) Council meet of this financial year on Friday. From compensation to states to tax waivers on various medicines, medical devices, and health services amid the second wave of the coronavirus pandemic — a host of issues will be discussed at the 43rd GST Council meet, according to reports. This will be the first GST meet after a gap of seven months.
Here are the key things to expect from 43rd GST meet on Friday
1) GST Compensation to the states
The GST Council is expected to discuss the compensation shortfall to the states amid the coronavirus pandemic. The shortfall in GST compensation payable to states in the current fiscal has been estimated at Rs 2.69 lakh crore. Several states want an extension of the GST compensation beyond July 2022 as economic uncertainty continues, according to ANI reports.
?This comes in the backdrop of a lot of states raising the issue of non-convening of the meeting for almost two quarters. With the revenue expected to decline due to the lockdown and second wave of the ongoing pandemic, the mode of compensation for states for the shortfall is expected to take centre stage. Even last time, there was a lot of confrontation between the States and the Centre on this subject and it finally got resolved. This time as well it is expected to be no different,? Divakar Vijayasarathy, founder and managing partner, DVS Advisors LLP
2) GST on medical devices and health services
The second wave of COVID-19 pandemic severely hit the country. Amid this, several states asked the reduction of GST rates on essential COVID-19 supplies. Rajasthan, Punjab, Chhattisgarh, Tamil Nadu, Maharashtra, Jharkhand, Kerala and West Bengal devised a joint strategy to press for a zero tax rate on COVID essentials, PTI reported.
Earlier this month, finance minister explained that how exempting COVID vaccines, medicines and oxygen concentrators from GST ambit will negatively impact the prices.
?Earlier, finance minister has highlighted that if full GST exemption is given qua COVID related items, the domestic manufacturers would not be able to offset their input taxes and would pass them on to the end consumers by increasing the sale prices. Given this situation, the GST Council may deliberate on keeping COVID-related medicines and equipment under the ‘zero-rated supply’ so as to allow seamless flow of input tax credits. The aforesaid will require amendment in IGST Act to the extent of expanding the definition of zero rated supply,? said Prateek Bansal, Associate Partner, White & Brief Advocates and Solicitors.
?Further, the Council can be expected to either exempt or allow input tax credit qua COVID-related expenditures (viz. medical equipment and vaccination drives) incurred by the businesses for the welfare of employees or their families,? Bansal added.
3) Multiple GST rate-slabs
The rationalization of multiple GST rate slabs has been a long-standing demand of the industry. Some experts believe that the GST Council may look at ways to rationalize the GST rates and reduce the number of slabs in Friday?s meet.
4) Extension of GST filing deadlines
Earlier in May, the finance ministry had extended timelines of various GST compliance for March and April considering the ongoing coronavirus pandemic. As several states announced local lockdowns till the end of this month, the GST Council is likely to announce another set of extension for May and June. ?As a measure of temporary relief, the GST Council is expected to reduce the interest rate applicable on delay in payment of tax; undo or reduce the penalty imposed in case of default in the furnishing of returns, and extend the limitation period for filing of the refund claims with retrospective effect,? said Gunjan Mishra, Partner, L&L Partners.
In a bid to boost the sales affected by the COVID-19 pandemic, the GST council might also consider lowering of present rate of 28 per cent on two-wheelers. Further, the Council might also provide an option of availing input tax credit to certain sectors (such as hospitality, real estate, etc.) which have been worst hit by the ongoing pandemic.
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