The exemption, which will be available up to August, comes with the caveat that it will be available for donation to the government or on the recommendations of a state authority to any relief body. So far, this was only available goods meant for free distribution.
While Opposition-ruled states and the Centre were divided on the issue of paring rates, they agreed to stick to the compensation formula to provide for less than 14% growth in states’ GST kitty. With the compensation cess — which consumers pay to provide assured returns to states — due to expire in June 2022, finance minister Nirmala Sitharaman said the issue will be discussed later. Revenue secretary Tarun Bajaj said the state-wise details will be worked out and the Centre will borrow Rs 1.58 lakh crore, which will be passed to states on a back-to-back basis.
Sitharaman said a group of ministers will be set up to look at the tax structure on vaccines and medical goods, with the report likely to be submitted by June 8.
The fitment committee comprising officers had recommended a reduction in rates for a number of items, including oxygen concentrators, ventilators and pulse oxymeters. While some of the Opposition ruled states wanted zero duty, including on vaccines, the Centre has argued against it.
While nine states wanted Covid materials to be zero rated (which means the entire value chain to be exempted, while providing tax credits to manufacturers), three states pushed for 5%.
The Centre, however, said it was not clear if the benefit of lower rates on vaccines or other goods will flow to the end-consumer. “The question arose whether lowering GST will benefit private hospitals (the intermediary) or the end-user, the citizen,” Bajaj said, adding that Covid-19 vaccine is being purchased by Centre and states and GST on it is coming back to them. He said a similar question was raised during the meeting on whether lower GST on ventilators will benefit the patients or only benefit private hospitals.
In addition, several compliance related relaxations were announced, including a reduction in the fee for late filers, as well as easing of the compliance burden.