The 43rd GST Council convened through video conferencing today under the chairmanship of Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. Union Minister of State for Finance and Corporate Affairs Shri Anurag Thakur, as well as Finance Ministers of States and UTs and senior officers from the Ministry of Finance and States/UTs, attended the meeting. The GST Council has issued the following suggestions regarding GST rates on products and services, as well as modifications to GST law and procedure. In terms of specific goods, it was resolved to form a Group of Ministers (GoM) to investigate the need for immediate additional assistance for COVID-19-related individual items. The GOM must submit its report by June 8, 2021. Companies can use EVC instead of a digital signature to file GST Return until August 31, 2021. The deadline for completing GST compliances and initiating actions, which was set for the 15th of April 2021 to the 29th of June 2021, has been extended to the 30th of June 2021. The law committee’s recommendations and modalities will be used to implement the Quarterly Return Quarterly Payment (QRQP) plan. The GST Compensation Cess was considered extensively by the Council, and it was determined to use the same formula as the previous year. The Centre will borrow Rs.1.58 lakh crore to cover the GST Cess deficiency.

The 43rd GST Council Meeting’s Expectations

Covid-19 was discussed at the GST Council’s 43rd meeting

As a COVID-19 relief measure, a number of COVID-19-related goods, such as medical oxygen, oxygen concentrators, and other oxygen storage and transportation equipment, certain diagnostic markers test kits, and COVID-19 vaccines, have been recommended for full IGST exemption, even if imported on a payment basis, for donation to the government, or on the recommendation of state authority. This exemption will be available until August 31, 2021. Previously, the IGST exemption only applied when the items were imported “at no cost” for free distribution. The same will be extended till the 31st of August, 2021. It’s worth noting that some products are already exempt from Basic Customs Duty. In addition, due to an increase in Black Fungus cases, the above IGST exemption has been extended to Amphotericin B. In terms of specific goods, it was resolved to form a Group of Ministers (GoM) to investigate the need for immediate additional assistance for COVID-19-related individual items. The GOM must submit its report by June 8, 2021.

Detailed analysis of the outcome of 43rd GST Council Meeting 

It’s worth noting that any payment will be made from the Compensation Fund, which will be funded by a tax of such cess or other sums as the GST Council may approve.

Amnesty for Small Taxpayers under the GST

Given the pandemic, the Council is expected to declare an amnesty policy on late GST return filing fees to provide significant relief to small taxpayers and MSME in the country. From July 2017 through April 2021, the scheme is expected to cover all pending GSTR-3B returns. Also, the amnesty scheme’s validity might be from June 1st to August 31st, 2021.

Certain GST Rates Have Been Rationalized

The City Council may consider lowering the existing 28 percent GST rate for two-wheelers. It is expected to increase revenue that has been harmed by the pandemic. With higher tractor sales indicating growth in rural demand, any rate cut would assist two-wheeler manufacturers in growing sales through competitive pricing.

The GST Council may potentially consider levying a tax on natural gas.

Natural gas might also be included in a three-tier GST scheme, with pricing shifting depending on consumption, according to sources. As a result, although residential piped natural gas (PNG) might be taxed at a lower rate of 5%, commercial piped natural gas could be taxed at a median rate of 18%, and automotive fuel CNG could be taxed at a maximum rate of 28%.

Resolving the Problems Caused by the Inverted Tax System

Fertilizers, steel utensils, solar panels, tractors, tyres, electrical transformers, pharma, textile, fabric, and railway locomotives all require inverted tax structure adjustment. The term “inverted tax” refers to tax rates that are greater on inputs and capital goods than on finished commodities. This results in a higher number of items having their input credit claims denied, as well as a host of administrative and regulatory complications. While imported tires are now subject to a 10% tariff, inputs such as rubber are subject to a 20% charge. Solar modules, on the other hand, are duty-free, while their components are subject to a 5%-10% tax.

The shortfall in rework compensation and financing requirements

Several states urged Union Finance Minister Nirmala Sitharaman to convene a GST Council meeting as soon as feasible to revise the compensation gap and borrowing demand. States also want to discuss extending the GST compensation topic beyond July 2022 in the Council as long as economic uncertainty exists. The federal government has been accused by some states of failing to meet with the GST Council at least once every quarter, as required by the Constitution.

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