GST Council meet today, proposal to bring diesel, petrol under tax regime, tax concession to 11 Covid drugs likely

The GST Council, chaired by Union finance minister Nirmala Sitharaman, will meet on Friday to discuss several key issues, including a proposal to bring petrol and diesel under the GST regime. "Finance Minister Smt @nsitharaman will chair the 45th GST Council meeting at 11 AM in Lucknow tomorrow. The meeting will be attended by MOS Shri @mppchaudhary besides Finance Ministers of States & UTs and Senior officers from Union Government & States," the Union finance ministry tweeted on Thursday.

During the meeting, the Goods and Services Tax Council may also consider extending the tax concessions on 11 Covid drugs till December 31 and compensation to states for making up the GST shortfall. Tax rates on various Covid-19 drugs and essentials were reduced till September 30 in the previous GST Council meeting held on June 12. The GST Council is likely to discuss a proposal to treat food delivery apps such as Zomato and Swiggy as restaurants and levy 5 per cent GST on supplies made by them, according to reports. It may also consider a roadmap to make Aadhaar authentication mandatory for existing 8 million registered firms gradually. 

“We understand the GST Council is going to discuss the issue of bringing petrol and diesel under the GST regime in view of Kerala high court’s directives to it in this regard,” a person aware of the developments about the GST Council meeting said. “Some states want discussion on compensation for making up for GST shortfall beyond June 2022. The GST relaxation on certain items, including health related items, may also come up for discussions at the meeting,” the person added.

GST Council meeting: What do the states say?

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However, Kerala finance minister KN Balagopal said on the eve of the meeting that the state government will oppose the move to bring petrol and diesel under GST regime, saying it will further reduce revenue generation for the state and asserted that the Centre should reduce its levies on the two commodities to provide relief to the common people.  “We will also ask to extend the GST compensation for another five years,” he said.

The Maharashtra government was against any move to encroach upon the state’s rights to levy taxes and would put forth its view in the GST Council meeting on Friday, deputy chief minister Ajit Pawar, who holds charge of his state’s finance department, said on Thursday. Pawar told reporters that the Centre was free to levy taxes, but "what is under the state's jurisdiction should not be touched". "If there is any move to do so, the state government will put forth its view in tomorrow's GST Council meeting," he said. 

Pawar also said the Centre should abide by all assurances made in Parliament when the GST law of 'one nation one tax' was enacted. "We are yet to get ₹30,000 crore to 32,000 crore of our share of the GST refund. Apart from Excise and stamp duty, the largest pool of revenue for the state government is from the GST. Earlier this week, the Maharashtra government highlighted the state's issues regarding finances during discussions with the NITI Aayog members," he said, according to PTI. 

GST Council meeting: Experts speak

ANI cited tax experts as saying that bringing petroleum products under GST will be a very tough call for both the Centre and states "as both will stand to lose" given the current situation. "Bringing petrol and diesel in the ambit of GST will help the industry as it will reduce the cost. Right now consumers are bearing both value-added tax (VAT) and excise duty but once it is brought under GST it will bring the prices down,” Rajat Bose, partner at Shardul Amarchand Mangaldas and Co, told ANI.

"It is a difficult task for Council as many states may not agree to this proposal as this is the major source of revenue for the states. If it is brought in GST ambit then they will have to share this with the centre," Bose said. Some sectors like textile, footwear, solar and pesticides are suffering from inverted duty structure as their output tax is less but they are paying more GST for raw materials, he added.

Anil Gupta, managing director of Okaya Power Group, said GST has been 5 per cent on electric vehicles, but for items like batteries, electronics charges we have to pay a GST of 18 per cent. "It would be great if the GST Council may rectify this inverted duty structure. We welcome whatever decisions are going to come in favour of the entire electric vehicle industry," Gupta told ANI.

This is the first time in 20 months that the GST Council will hold a physical meeting. After December 18, 2019, all the GST Council meetings were held virtually.

(With agency inputs)