GST Council May Cut Rates on Oxygen and Medical Equipment

NEW DELHI : The Goods and Services Tax Board will consider reducing the GST rate from 12% to 5% on medical oxygen and related equipment, pulse oximeters and test kits for a limited period to help to reduce the cost of treating covid-19, during its virtual meeting on Friday.

The federal indirect tax body, however, is likely to leave the tax rate on vaccines and drugs untouched because these attract only 5%, the merit rate that covers most essential goods, has declared a person familiar with the discussions between the Union and the state governments. .

A group of officials considered suggestions from state governments and other stakeholders and proposed that any relief take the form of a 5% rate rather than an exemption, or a special rate or a zero rate of the product, which could distort the structure of the GST.

The panel proposed that the revised tax rate on oxygen concentrators and generators and pulse oximeters be valid until the end of July and on covid test kits until the end of August, the person said. The panel did not recommend any change in the vaccine tax rate because it is already at 5% and taxes paid on raw materials and services could be adjusted against the vaccine tax debt.

Additionally, as treatment protocols are constantly evolving, no tax changes are proposed for drugs, most of which are already in the 5% bracket. Given state governments’ desperation to cut costs amid a raging pandemic, these proposals could undergo some changes when the Council discusses them on Friday.

The Council is also expected to expand the list of medical supplies for covid relief that are eligible for import duty exemption and built-in GST when imported into the country for distribution. or a free donation. However, the tax rate on hand sanitizers, masks, personal protective equipment and ambulances will remain unchanged as they are in the 5% slab, with alternatives available.

Last month, the Center exempted basic tariffs and agricultural taxes on items such as medical oxygen, oxygen generators and concentrators, ventilators and cryogenic transport tanks. Exemption from customs duties and IGST for certain diagnostic kits and reagents has also been announced for a limited period. It also reduced the IGST on imported oxygen concentrators for personal use from 28% to 12% for a limited period.

However, the Delhi High Court said last week that the 12% IGST tax on oxygen concentrators for personal use or those received as gifts was “unconstitutional,” which could weigh on the Council’s deliberations. .

The council can be expected to further reduce the rate or grant an exemption to imports of personal-use oxygen concentrators for a limited period, said Niraj Bagri, partner at Dhruva Advisors LLP, a consultancy firm.

The Council can weigh the calls of the bureaucracy

The GST Council is expected to discuss the so-called Kafkaesque bureaucratic decisions to enforce the Goods and Services Tax, which may have serious implications for the industry, at Friday’s council meeting.

Punjab Finance Minister Manpreet Singh Badal told Union Finance Minister Nirmala Sitharaman that bureaucratic decisions ranging from restricting input tax credits to canceling registration, by removing political oversight compliance from the GST Council, set a dangerous precedent by delegating excessive powers. to bureaucrats.

The Punjab will not incorporate such legal changes into state law unless they are approved by the council, he said.

“The GST is increasingly seen as causing excessive harassment and arbitrariness (freezing of productive assets of companies, suspension of registrations and denial of eligible tax credits) and moving away from a fair and non-adversarial tax regime which forms the basis of a progressive tax regime, “Badal said in his letter to Sitharaman on Monday. The Mint saw a copy of the letter.

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