GST Council to meet Saturday, discuss tax exemption on Covid-19 essentials

GST Council to meet Saturday, discuss tax exemption on Covid-19 essentials

The GST Council is likely to consider the taxation of Covid-19 relief essentials in its next meeting scheduled for June 12. The meeting is expected to deliberate the exemption and concession on Covid-related items, following the recommendation submitted by the Group of Ministers (GoM) on Tuesday.

The GoM recommendation is yet to be made public, but it is learnt that the issue of taxing the vaccine has been sent back to the Council. However, it suggested temporarily reducing the GST rate to 5 per cent on commercial imports & domestic supply of Coronavirus (Covid-19) medicines & material, including medical oxygen, oxygen concentrators, pulse oximeters & testing kits.

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The GST Council retained levies on COVID-19 vaccinations and medical supplies unchanged at its previous meeting on May 28. The members were unable to agree on the benefits of the tax cuts. The Congress and other Opposition-controlled states had requested a tax cut, but the Centre believes that the tax decrease will not result in substantial benefits for people.

The rate fitment committee, which is made up of indirect tax authorities from the Centre and states, suggested lowering the GST rates on medical grade oxygen, oxygen concentrators, pulse oximeters, and COVID-19 test kits ahead of the council meeting on May 28. The committee had also suggested keeping the current GST rate of 5% on vaccines.

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Following that, a GoM led by Meghalaya Chief Minister Conrad Sangma advised a three-month tax cut on a plethora of COVID-19-related items such as ventilators and personal protective equipment (PPE) kits, among others.

Minister of State for Finance Anurag Thakur, as well as finance ministers from states and union territories and top executives from the Union government and states, would attend the 44th GST Council meeting, according to a tweet from the Union finance ministry on Friday.

The GST compensation amount for FY22 at the Centre should be greater than the anticipated Rs 1.58 lakh crore: Opp-ruled states

The GST compensation amount for FY22 at the Centre should be greater than the anticipated Rs 1.58 lakh crore: Opp-ruled states

Three opposition-ruled states stated on Sunday that the compensation sum guaranteed by the Centre is expected to be more than the Rs 1.58 lakh crore anticipated by the Centre and that a special session of the GST Council will be summoned to debate it.

The finance ministers of Kerala, Punjab, and Chhattisgarh claimed during the GST Council meeting on May 28 that there was no unanimity on the compensation required for 2021-22 and that a special session will be summoned specifically to examine ‘Revenue Augmentation and Post June 2022 Compensation.’

Manpreet Singh Badal, Punjab Finance Minister, said that all states are experiencing revenue shortfalls of 20-50 per cent, and that “we have recommended that the Council should convene every quarter to discuss the income status of states.”

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“Punjab has a compensation gap of Rs 5,000 crore as of April. All opposition-ruled states agreed that the compensation sum from the federal government should be increased “PTI quoted Badal as saying.

Punjab, he added, has been lobbying for a discussion on the compensation system that will be implemented after June 2022, since states continue to experience revenue gaps as a result of the GST implementation compared to pre-GST times.

Kerala Finance Minister K N Balagopal stated that the Centre owes the state Rs 4,077 crore in compensation, and that the Centre should ensure that the states receive the promised revenue rise of 14%.

“The revenue growth projection of 7% is not a guess. Because some states are experiencing negative growth, this premise is invalid. We’ll have a conversation about it “Balagopal continued.

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T S Singh Deo, the Finance Minister of Chhattisgarh, said the Centre has made forecasts on compensation and borrowing, and that a comprehensive debate will take place at the GST Council’s special session, the date of which has yet to be determined.

For the current fiscal year, the Centre estimates that states will need Rs 2.69 lakh crore in compensation. According to the agenda note distributed before the Council meeting, over Rs 1.11 lakh crore will come from a cess on luxury, demerit, and sin items, which would be handed to states to compensate them for the revenue gap resulting from GST implementation.

The remaining Rs 1.58 lakh crore will have to be borrowed to satisfy the promised compensation, according to the note, which is predicated on the expectation that state revenue growth will be 7% this fiscal.

Section 206C(1H) of the Income Tax Act 1961 at a Glance

The Centre borrowed on behalf of the states and issued Rs 1.10 lakh crore in the fiscal year 2020-21 to make up for the GST revenue shortfall. A total of Rs 68,700 crore was collected through a cess charge.

However, there are voices against the extension. Former Bihar deputy chief minister Sushil Kumar Modi, who was closely associated with formulation of GST laws and represented Bihar in the GST Council till October 2020, said, “I don’t think it will be practical to extend the guaranteed compensation further. Except in FY18, revenue collection was not enough to achieve annual growth of 14% in any other year.

The average revenue growth of most states was 8-9% in pre-GST period and roughly, the rate has been same in the GST regime.” He added that it won’t be ‘feasible’ for the Centre to give states assurance of revenue growth for another five years. “It will take at least four years for the Centre to repay the loans (being taken for compensating states in FY21 and FY22) with interest. If the same assurance is extended, it will create a fresh liability. The cess collections won’t be enough to cover servicing of the existing debt (FY21 and FY22) and to give fresh compensations,” Modi noted.

 

Notified Amendments in declaring HSN/SAC in Tax Invoice & GSTR-1

This update is regarding amendments notified in declaring HSN/SAC in Tax Invoice and GSTR-1:

1. HSN/SAC mandatory on Tax Invoices w.e.f.01-04-2021:

S. No Aggregate Turnover in the preceding Financial Year HSN/SAC to be mentioned

  • 1. more than Rs.5crores HSN Code of 6 Digits is mandatory for all tax invoices (B2B & B2C)
  • 2. up to Rs.5crores HSN Code of 4 Digits is mandatory for all B2B tax invoices.
    üOptional for B2C tax invoices

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Implication of above amendment

HSN/SAC has to be mentioned on Tax Invoices for all B2B & B2C transactions

2. Rate of Tax column added in GSTR-1 for each HSN/SAC furnished in HSN summary of outward supplies:

In column 6 of Table 12 -Rate of Tax to be declared instead of Total Value in GSTR-1of May’21and onwards

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Implication of above amendment

There is a requirement to incorporate HSN wise entries in accounting ledgers of accounting software. So that required information i.e., HSN with the rate of tax can be derived for GSTR-1.

Following Information/fields should be available from accounting records to prepare GSTR1:
HSN Description UQC Total Quantity Total Taxable Value Rate % GST-IGST/CGST/SGST