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Centre to present options to states for meeting compensation shortfall at GST Council meeting

Centre to present options to states for meeting compensation shortfall at GST Council meeting

The Centre will present options to states for making up the goods and service tax (GST) shortfall beyond June 2022 at the GST Council meeting on Friday, even as it expects monthly revenues to be upwards of Rs 1.1 lakh crore for the coming months.

According to people aware of the issues to be discussed at the meeting, the council will also consider extending GST rate reduction on Covid-19 treatment drugs and medicines till December 31, besides reducing rates on eight more medicines from 12% to 5%. Rate increase on solar PV modules to 12% from 5% may also be taken up.

The issue of including petrol and diesel under the GST structure may also be discussed, said one of the persons aware of the details, who did not wish to be identified.

Petrol and diesel are currently outside the purview of GST and attract central excise duty by the Centre and value added tax by states at varying rates. The GST Council Secretariat has asked the council to decide on the inclusion, following a Kerala High Court order.

The council may also take up the issue of allowing the tenure of the National Anti-profiteering Authority to expire by November-end and empowering the Competition Commission of India.

“There will be a presentation made to the states. A few options will be suggested,” an official privy to the development said on condition of anonymity.

The official said the revival in GST collections from July onwards has indicated that for the current year monthly revenues are expected to improve. The revenue collection along with back-to-back assistance of Rs 1.59 lakh crore will be adequate to cover the revenue shortfall gap and partially compensate for 2020-21 arrears, after taking into account Rs 1 lakh crore that will be paid to states as compensation cess.

The GST compensation is calculated as per the formula provided in the Compensation Act and is released on a bi-monthly basis. However, due to the pandemic, states’ revenues and amounts coming from compensation cess have taken a hit, while compensation due from the Centre has increased. GST compensation of Rs 1.13 lakh crore has been released to states to partly meet the compensation payable since April 2020.

The Centre borrowed Rs 1.1 lakh crore in 2020-21 and gave to states as back-to-back loans to meet the shortfall. The council decided to borrow another 1.59 lakh crore for 2021-22 – of which Rs 75,000 crore has been issued – and extended the period of levying cess which will help in repayment of the loan.

Covid Relief
The fitment committee has recommended that the GST concession on Amphotericin B, tocilizumab, remdesivir and anticoagulants like heparin should continue till December 31, instead of September 30. The GST Council had exempted Amphotericin B and tocilizumab from GST and reduced the rate on remdesivir and anti-coagulants to 5% from 12% in June.

The committee has also recommended lowering GST to 5% from 12% till December 31, on itolizumab, posaconazole, infliximab, bamlanivimab, etesevimab, casirivimab, imdevimab, 2-Deoxy-D-Glucose and favipiravir drugs. The recommendation has been made after consultation with the health and family welfare ministry, besides the Department of Pharmaceuticals, said people aware of the details.

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