written by | September 20, 2021

GST Council Meet: Tax concessions on Medicines, No Decision on Petrol and Diesel

The first in-person GST council meeting in nearly two years saw a slew of changes including the extension of relief on COVID drugs and other life-saving medicines by three months, taxation on food delivery platforms and cloud kitchens, and a hike of GST rates on locomotives and railway parts. The inclusion of petrol and diesel was not discussed at the Council meeting.

Chaired by Finance Minister Nirmala Sitharaman, the meeting was held in Lucknow and attended by the Finance Ministers of all States and UTs, in addition to other senior officials from the government.

Highlights

Here are the key highlights of the meeting:

Extension of existing concessional GST rates

  • The COVID -19 relief measures were extended in the form of GST rate concessions by three months, till 31 December 2021, on the following drugs:

COVID Treatment Drug

Concession Rate

Amphotericin B

nil

Remdesivir

5%

Tocilizumab

nil

Anti-coagulants like Heparin

5%

However, the concession was not extended to other COVID - 19 related medical equipment.

  • Reduction of GST rate up to December 31st  to 5%, on more COVID - 19 treatment drugs, namely:
  • Itolizumab
  • Posaconazole
  • Infliximab 
  • Favipiravir
  • Casirivimab & Imdevimab 
  • 2-Deoxy-D-Glucose 
  • Bamlanivimab & Etesevimab
  •  Life-saving drugs such as those treating muscular atrophy namely Zolgensma and Viltepso are now under the purview of the exempted category under GST
  • The import of any such drug for personal use shall not attract IGST
  • Moreover, the GST Council cut tax rates from 12% to 5% for the medicines used in cancer treatment.

Recommendations on GST Rate Changes for Goods (Effective from October 1, 2021)

S No.

Description

From

To

Change

1.

Retro fitment kits for vehicles used by the disabled 

Appl. rate

5%

Decrease

2.

Fortified Rice Kernels for schemes like ICDS, etc.

18%

5%

Decrease

3.

Medicine Keytruda for treatment of cancer 

12%

5%

Decrease

4.

Biodiesel supplied to OMCs for blending with Diesel

12%

5%

Decrease

5.

Ores and concentrates of metals such as iron, copper, aluminium, zinc, and few others

5%

18%

Increase

6.

Specified Renewable Energy Devices and parts

5%

12%

Increase

7.

Cartons, boxes, bags, packing containers of paper, etc

12/18%

18%

Increase

8.

Waste and scrap of polyurethanes and other plastics

5%

18%

Increase

9.

All kinds of pens

12/18 %

18

Increase

10.

Railway parts, locomotives & other goods in Chapter 86 

12

18

Increase

11.

Miscellaneous goods of paper like cards, catalogue, printed material (Chapter 49 of tariff)

12

18

Increase

12.

IGST on import of medicines for personal use, namely 

i. Zolgensma for Spinal Muscular Atrophy 

ii. Viltepso for Duchenne Muscular Dystrophy 

iii. Other medicines used in treatment of muscular atrophy recommended by the Ministry of Health and Family Welfare and Department of Pharmaceuticals.

12

Nil

Decrease

13.

IGST exemption on goods supplied at Indo-Bangladesh Border haats

Appl. Rate

Nil

Decrease

14.

Unintended waste generated during the production of fish meal except for Fish Oil 

Nil (for the period 1.7.2017 to 30.9.2019)

   

GST on Food Delivery Apps

  • The Council has notified that E-commerce operators (ECOs) which deal in food delivery services such as Zomato and Swiggy, will be taxed at 5%. Earlier, the restaurants were responsible for tax payment and now the burden has been transferred to these food delivery platforms, resulting in no major change for consumers. 
  • The changes will be effective from January 1, 2022, to allow the food aggregators time to make changes in their systems for such tax to be charged. However, it remains to be seen how the tax cascading effect will be dealt with.
  • These changes will prove to be an important factor as more and more brick-and-mortar businesses evolve into cloud kitchens. 
  • One of the major reasons for this proposal was that there was no mandatory registration check by ECOs and hence, there were many unregistered restaurants delivering through these platforms resulting in gross underreporting of taxes. 
  • The loss of revenue to the exchequer due to under-reporting by food delivery operators may be as much as Rs 2,000 crore in the last two years. These apps are currently registered as Tax Collectors at Source (TCS) under GST.

Clarifications with regard to the GST rate on Goods and Services
 

Sl No.

Goods/Items

GST Rate

1.

Pure henna powder and paste, having no additives

5%

2.

Brewers' Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues, falling under HS code 2303

5%

3.

All laboratory reagents and other goods falling under heading 3822

12%

4.

Scented sweet supari and flavoured and coated Elaichi falling under heading 2106

18%

5.

Carbonated fruit beverages of fruit drinks and carbonated beverages with fruit juice

28%

Cess 12%

6.

Tamarind seeds fall under heading 1209

Nil for seeds used for sowing, otherwise 5%

7.

External batteries sold along with UPS systems/inverter

28%, other than lithium-ion batteries

8.

UPS/inverter

18%

9.

Paper and paperboard containers, whether corrugated or non-corrugated

18%

10.

Fresh/dried nuts

5/12%

11.

Pharmaceutical goods falling under heading 3006

12%

 

Services

 

1.

Coaching services to students provided by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities”

Nil

2.

Coaching services to students provided by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities”

5%

3.

Ice cream by parlours

18%

4.

Overloading charges at toll plazas

Nil

5.

Renting of vehicles by state transport undertakings and local authorities 

Nil

6.

Grant of mineral exploration and mining rights

18%l

7.

Admission to amusement parks with rides, etc.

18%

8.

Admission to facilities that have casinos

28%

Other Changes related to GST rates on Goods

  • The supply of mentha oil from unregistered persons has been brought under reverse charge. Further, Council has also recommended that exports of Mentha oil should be allowed only against LUT and consequential refund of input tax credit. 
  • Brick kilns would be brought under a special composition scheme with a threshold limit of Rs. 20 lakhs, with effect from April 1,.2022. A GST rate of 6% would be levied on bricks without ITC under the scheme. The GST rate of 12% with ITC would otherwise apply.
  • The council decided that it was not the right time to include petrol or diesel under the ambit of GST. The Kerala High Court had ordered that the matter should be taken up by the council during the meeting; however, the Council members did not want petroleum products to be included under the GST.
  • It was decided at the meeting that the GST compensation cess levied on luxury and demerit goods, will need to be continued till March 2026 to repay the borrowings done in 2020-21 and 2021-22. The Opposition-ruled states had demanded an extension of the GST compensation regime beyond June 2022.
  • A GoM will be set up to examine the issue of correction of inverted duty structure for major sectors and rationalize the rates and review exemptions from the point of view of revenue augmentation, from GST.

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