Fusion of TPS slabs should take longer
NEW DELHI : A plan to merge the 12% and 18% goods and services tax (GST) brackets into a single rate that will apply to most products is expected to be delayed, while compensation for the GST levied on items like cars could be extended, three officials said familiar with discussions between central and state governments.
Friday’s GST Council meeting is expected to discuss a host of state-reported issues regarding tax rates on medical supplies, in addition to the fiscal 22 GST compensation mechanism.
The meeting’s agenda will be ready by Tuesday, a government official, one of the three cited above, said on condition of anonymity.
While the plan to merge the two slabs is under consideration for several months, it will involve a change in the design of the GST structure itself and impact some of the goods, a second official said. a state government.
While a merged GST rate somewhere in the middle could reduce the number of slabs and reduce the tax burden on items to the rate of 18%, it could result in a higher burden on items falling into the slab by 12%. , which includes some medical equipment. , medical grade oxygen and processed foods.
The GST Council, which meets after seven months, is expected to discuss whether a borrowing scheme put in place last fiscal year to meet states’ GST compensation requirement should also be continued this year. year.
The last GST Council meeting in October 2020 made the policy decision to extend the GST suspension beyond June 2022 to help pay off borrowings incurred in FY21 to compensate states.
The Board had only approved this borrowing agreement for fiscal year 21. Continuing the same in the current fiscal year also means that the termination will remain for a longer period.
Experts said adjustments to tax rates on medical supplies needed in the fight against covid-19 should be the priority of discussions at the GST Council meeting.
“Reduction in rates on vaccines and on imported oxygen concentrators for personal use, clarity on the availability of input tax credit on medical supplies donated by businesses or given to employees for personal use are among the key issues many expect to receive attention, ”said Abhishek Jain, tax associate, EY.
States such as Odisha, Punjab and West Bengal have drawn the attention of the Center to GST issues that need urgent attention.
Odisha Chief Minister Naveen Patnaik wrote to Union Finance Minister Nirmala Sitharaman earlier this month asking for the GST exemption on covid-19 vaccines and tax support for states to fight the pandemic.
Punjab Finance Minister Manpreet Singh Badal has expressed his displeasure that significant rule changes such as restricting input tax credits were taken by a group of officials without discussion in the Council.
Badal called for a discussion on how to create a “terrorism-free GST compliance” environment.
Sitharaman explained earlier this month that if a full GST exemption were granted, vaccine manufacturers would not be able to offset their input taxes and would pass them on to the end consumer by raising the retail price.
Experts, however, said the zero rate of the GST, instead of an outright exemption, will allow vaccine manufacturers to claim back taxes paid on inputs.
With states having a long list of grievances, Friday’s virtual council meeting could be a long affair, said a third official, who also spoke on condition of anonymity.
An email sent to the Union Finance Ministry requesting comment on the story went unanswered until time of publication.
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