Haryana on Monday joined Gujarat in allowing GST reimbursements on Covid relief materials donated by corporates, non-government organisations and individuals. While the Centre sees no legal issue with States reimbursing GST on Covid relief materials, it feels such a move will aggravate GST revenue shortfall situations.

A senior Finance Ministry official told BusinessLine that the GST law does not encourage exemption, but there is no bar on refund or reimbursement scheme. “Technically, there is no problem in giving such relief, either by Centre or by State. However, there could be some practical issues,” the official said hinting at the revenue position. It is estimated GST revenue shortfall could be more than ₹ 1.5 lakh crore this fiscal (FY 2021-22).

Beneficial for State

Aditya Singhania, Founder of Singhania’s GST Consultancy said that undoubtedly there could be revenue shortfall during the lockdown periods , but it certainly is not a trend. States, in order to contain the pandemic are issuing tenders to procure necessary infrastructure where the cost to the States is cost of material including GST. “However, with this GST reimbursement model, burden of meeting the cost of material can be borne by the corporates who may come forward to donate as part of Corporate Social Responsibility. The point is States have a better add-on as they can get the necessary infrastructure merely by reimbursing GST which is hardly 5 per cent to 12 per cent,” he said.

Haryana Government, through a notification dated May 17, announced facilitating donation of 15 Covid-related materials such as liquid medical oxygen and other health equipment such as ventilators, medicines etc by way of reimbursement of GST (including the State, Central or IGST portions), if any, already paid on such items.

Valid Till June 30

The notification also mentioned conditions that included such Covid related material shall be donated free of cost to the State, hospitals run by State Government, or any Hospital/ Institution permitted by State Government to receive such material. The scheme will remain in force up to June 30. The Health & Family Welfare Department would issue a certificate of such donation, which needs be submitted to the Excise and Taxation Department for claiming the refund. The department, after verifying the amount of GST paid, will sanction the reimbursement of GST.

On May 1, Gujarat Government had decided to reimburse the IGST on procurement through import of 21 Covid-related items such as oxygen concentrators, vaccines and medicine etc by individual, corporate and or NGO to help the State.

The difference between Haryana and Gujarat models is that Haryana model proposes to reimburse CGST and SGST also i.e. when procured locally. This will promote more donations as many people who do not have vendor connections outside India can also chip in. There is also better price competitiveness. Therefore, even if one imports, others can procure locally from this importer for donation which would make the process smooth and speedy.