Next GST Council meeting to be in May 2021; rate reductions and duty relaxations on essentials

Over the next few weeks, the Centre will call a meeting of the Goods and Service Tax (GST) Council, with the agenda likely to include tax rates on critical products in the battle against COVID-19. Several states have already publicly requested a GST Council meeting to lower prices on critical products such as oxygen concentrators, ventilators, life-saving medications, and other medical devices. Alternatively, the Centre may take an executive call on the same under cover of the GST laws.

Many states, such as Delhi, Punjab, and Chhattisgarh, want the GST on ventilators, concentrators, and life-saving drugs like Remdesivir to be temporarily exempted. Government officials told MoneyControl publication that there would be a GST Council meeting very soon, most likely in May 2021. The GST Council is putting together a new agenda. They had prepared an agenda for a scheduled Council meeting before the second wave of COVID-19, but they must create a new one due to the current situation.

The GST Council last met in October 2020. Manish Sisodia, the Deputy CM of Delhi, wrote to Finance Minister Nirmala Sitharaman on 3rd May 2021, requesting that the GST on oxygen concentrators be waived for six months. 

Given the rising number of COVID cases in the national Capital, Sisodia wrote that concentrators were “key life support machines”. The people would benefit if the GST part of the price could be waived. Oxygen concentrators were previously subject to a GST at 28%, which was cut down to 12% last week. On 3rd May 2021, the Centre exempted a range of imported products from integrated GST, including concentrators, medical-grade oxygen, ventilators, and life-saving drugs, including Remdesivir, Tocilizumab, and Favipiravir. 

On 3rd May 2021, an ad-hoc Customs order was issued by the government granting exemption from the Integrated Goods and Services Tax (IGST) to import free COVID-relief material for free distribution to the affected people in India. 

It includes the goods already imported and still to be cleared on the date of issue of this order. The exemption shall be applicable up to 30th June 2021, primarily benefiting all charitable organisations.

Together with IGST, Basic Customs Duty and Health Cess are also exempted from these materials. The goods include Remdesivir injection, API and Beta Cyclodextrin, inflammatory diagnostic kits, medical-grade oxygen, concentrators, transport tanks, vaccines, etc.

It is a need-of-the-hour relief for providing access to vaccines, oxygen and vital COVID-fighting medicines at a low cost for meeting the shortfall in domestic production. It provides stability to the healthcare system that is presently under severe stress to meet these requirements.

The businesses domestically manufacturing these goods and relief materials could face tough competition due to importing these free goods. Hence, the government must introduce measures that boost domestic production of medical necessities. 

Only donations and any free supplies from outside India for free distribution are exempted. It must be noted that the purchase of these goods from outside India for distribution in India will not attract exemption. The IGST and customs exemptions apply to products sent to India as a form of donation and distributed by non-government organisations such as the Red Cross. 

Some states, including Delhi, are seeking clarification on the necessary medical products manufactured domestically. Punjab and Chattisgarh are among the states that have asked the GST Council to convene an emergency meeting to review the prices of life-saving equipment and medicines.

Earlier in March 2021, the Centre was ready to discuss with states on bringing in petrol and diesel under GST, which the Finance Minister had later clarified in Parliament. It is now understood that this issue was part of the earlier GST Council agenda being drawn up before the sharp increase in daily COVID-19 cases. Discussions on issues such as these are now put aside, with the focus expected to be on the pandemic.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in