45th GST Council Meeting

45^th GST Council Meeting

Subject – Economy

Context – GST Council tweaked rates for drugs, shifted tax liability to food delivers firms

Concept –

• Rate cuts for a number of cancer and Covid-related medicines and a shift in tax payment liability to restaurant delivery aggregators such as Swiggy, Zomato instead of restaurants, were two of the key decisions taken by the Goods and Services Tax (GST) Council in its 45th meeting in Lucknow.
• The Council, which held an in-person meeting after 20 months, also decided to continue compensation cess levy only for repayment of borrowed amounts beyond June 2022.
• A proposal to bring petroleum products under the indirect tax regime was discussed, but it was decided to keep the proposal out of its ambit for now.

Key decisions made by GST Council

• Existing concessional rates, which were valid till September 30, have been extended till December 31 for Covid-19 medicines: Remdesivir (5 per cent), Tocilizumab (nil), Amphotericin B (nil), and anti-coagulants like Heparin (5 per cent). However, the concessional tax for medical equipment will end on September 30.
• Reduction of GST rate to 5 per cent on more Covid-19 treatment drugs, up to December 31: Itolizumab, Posaconazole, Infliximab, Favipiravir, Casirivimab & Imdevimab, 2-Deoxy-D-Glucose, Bamlanivimab & Etesevimab.
• The Council also decided to remove GST on the import of muscular atrophy drugs like Zolgensma and Viltepso, which cost crores of rupees, Sitharaman said. The GST rate for Keytruda, used for the treatment of cancer, has been cut to 5 per cent from 12 per cent.
• The Council also cut GST rates on fortified rice kernels to 5 per cent from 18 per cent, and on bio-diesel for blending in diesel to 5 per cent from 12 per cent. National permit fee for goods carriage has been exempted.
• GST on ores and concentrates of metals such as iron, copper, aluminum, and zinc has been increased from 5 per cent to 18 per cent, and that on specified renewable energy devices and parts from 5 per cent to 12 per cent.
• Cartons, boxes, bags, and packing containers of paper will now attract a uniform 18 per cent tax in place of the 12 per cent and 18 per cent rates. Waste and scrap of polyurethanes and other plastics will also see tax going up to 18 per cent from 5 per cent currently.
• All kinds of pens will be charged an 18 per cent rate, while miscellaneous goods of paper like cards, catalogues, and printed material will see GST increasing to 18 per cent from 12 per cent. The rate for carbonated fruit beverages and carbonated beverages with fruit juice will attract a GST rate of 28 per cent, plus compensation cess of 12 per cent.
• IGST of 12 per cent on import of medicines Zolgensma for spinal muscular atrophy and Viltepso for Duchenne muscular dystrophy, has been waived. These drugs cost up to Rs 16 crore.
• The Council also decided to put an end date of June 2022 to the compensation mechanism, as mandated in law. The levy of compensation cess will continue from July 2022 onwards till March 2026 to service the borrowing, which had been resorted to in order to bridge the compensation gap in the years 2020-21 and 2021-22.
• The debt for making compensation payments to states is estimated to be around Rs 2.7 lakh crore.
• States were guaranteed compensation under GST for the revenue gap between actual collections and the protected amount based on 14 per cent compounded rate from base year 2015-16 for five years after the GST rollout, until June 2022. Last year, the government had decided to borrow to meet the compensation cess deficit through back-to-back loans to states.
• Effective January 1 next year, the Council has decided to make e-commerce operators engaged in restaurant services liable for payment of tax. This will essentially shift the responsibility of paying the 5 per cent GST to the aggregators from the restaurants.

To know about GST Council and Compensation cess, please click here.