Uncooperative feudalism?

Mohan Lavi | Updated on June 17, 2021

Exempt all Covid-related items from GST

One would have thought that the decision to exempt Covid-related equipment and medicines from GST would have been instantaneous and without argument. Instead, the GST Council had to meet twice to decide on the issue.

In the first meeting, it was decided to constitute a Group of Ministers to deliberate on the issue and give recommendations. The Group of Ministers turned out to a Group of Ministers from the same party.

In the second meeting, the GST Council announced that 18 Covid-related items would get GST concessions and not exemptions.

The recommendations are what we have come to see for about four years now when it comes to GST rates — an elaborate exercise in cherry-picking.

Tocilizumab has managed to get exemption but Remdesivir misses out — it is taxed at 5 per cent. Oxygen, oxygen generation equipment, related medical devices and testing kits and machines will now be taxed at 5 per cent instead of 12 per cent. It would appear that 5 per cent was fixed only because it was the next lowest slab.

One wonders what would have been the recommendation of the Council if the 5 per cent slab was not there and the next lowest slab was Nil. If we were to hazard a guess, they would have probably created a new rate (as was done for diamonds). Exempt and Nil-rated never showed up as options.

Pulse oximeters, hand sanitisers, temperature check equipment and furnaces for crematorium have all been bracketed in the 5 per cent slab. The rate on ambulances comes down from 28 per cent to 12 per cent. As has been the trend with all Covid-related concessions, a sunset date is fixed for the reduced rates — the above rates would be applicable till September 30, 2021.

The previous Notification had fixed the sunset date as August 31, 2021. The only explanation one can have for the new date is that the first meeting took place in May and the second meeting took place in June (though there was only a gap of about 10 days between the two meetings).

Considering the fact that Covid and its variants will be with us for some time to come, the GST Council would have done well to provide an omnibus exemption for all things Covid without a sunset date.

Revenue may have been lost but the last thing on anyone’s mind during a pandemic should be tax revenues. Had the Council taken this stance, they would not have taxed installation of crematoriums at 5 per cent.

Growing dissent

However, what is perhaps more worrying is that cracks are beginning to appear in the GST Council and dissent is getting louder.

The West Bengal Finance Minister expressed his dissent at being silenced when he wanted to express his views. The Punjab Finance Minister has also expressed his objection to a few decisions. The Tamil Nadu Finance Minister had a few things to say to the representative of Goa after the previous meeting of the Council.

It is critical for the GST Council to step in now, listen to what the dissenters have to say and take a balanced decision. The GST Council has been touted as a shining example of the spirit of cooperative federalism. If it turns out to be an example of uncooperative feudalism, it is the tax payer who is going to suffer.

We would soon be seeing the fourth anniversary of GST. It has been a rocky journey for everyone. There is much that can still be done to simplify the rules and regulations — all that is needed is political will and administrative efficiency. However, going by what we have seen till date, it would appear that status quo ante would prevail — laws would be amended in bits and pieces.

The writer is a chartered accountant

Published on June 17, 2021

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