GST Council to meet on May 28, compensation shortfall on agenda

As Covid second wave ravages the country, several states had urged Sitharaman to convene a GST Council meeting at the earliest

The Goods and Services Tax Council (GST) will meet on May 28, after a gap of more than six months as country battles the  ravaging second Covid-19 wave. Several states had urged Union Finance Minister Nirmala Sitharaman to convene a GST Council meeting at the earliest, to rework compensation shortfall and borrowing requirement and provide tax relief on Covid-19 related goods. 

"Union FM Nirmala Sitharaman will chair the 43rd GST Council meeting via video conferencing at 11 AM in New Delhi on 28th May 2021...." Sitharaman's office tweeted on Saturday. 

Other key issues pending before the Council include rationalisation of GST rate slabs, correction of inverted duty on certain items and inclusion of petroleum products, etc.

In fact, states also want to discuss extension of the GST compensation issue beyond July 2022 in the Council as economic uncertainty continues

Several states have accused the Centre for violating the constitutional mandate of convening GST Council meeting at least once every quarter. 

The GST Council met last on October 5 (extended till October 12) last year as it finalised contours of borrowing by states to meet compensation requirement for the shortfall.

States were promised compensation for 5 years after GST implementation in July 2017 to make up for revenue shortfall, if any, since states lost autonomy over indirect taxes. Compensation cess is levied on a few items in the 28 per cent GST slab, such as automobiles, cigarettes, and aerated drinks.

Chhattisgarh will likely take up the issue of exempting GST on Covid-19 vaccines, which attract 5 per cent GST and medicines including Remdesivir Injection, etc. that attract a tax of 12 per cent. 

West Bengal Finance Minister Amit Mitra, in a letter to Sitharaman, highlighted that the compensation shortfall was expected to be ‘much higher’ than Rs 1.56 trillion estimated last year due to the second Covid-19 wave, indicating the need to rework the shortfall estimation and borrowing requirement. He called the states compensation situation 'alarming' and 'deeply distressing. 

Punjab FM Manpreet Singh Badal, in a letter to his Union counterpart, said that GST exemption on hand sanitisers, face masks, gloves, PPE Kits, temperature scanners, oximeters, ventilators and the like should be discussed, besides relief to sectors such as MSMEs  aviation, hotels, restaurants, entertainment, commercial reality and retail.