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GST Council to discuss compensation cess extension, vaccine tax exemption on Saturday

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Getty ImagesThe Goods and Services Tax (GST) Council will meet on June 12 to decide on extension of compensation cess beyond 2022 and tax exemption or reduction in rate on various Covid-related items including vaccines.

The last Council, which met on May 28, decided to set up a group of ministers (GoM) to look into demands for tax relief on Covid-19 essentials, including PPE kits, masks and vaccines.

“It (GST Council) will take up compensation to states as also discuss the group of minister’s report on Covid-19 medication and essentials,” a government official privy to the development said.

GST compensation of Rs 1.58 lakh crore was planned to be financed through back-to-back loans to be raised by the Centre while Rs 1 lakh crore was expected to be met through the GST compensation cess over FY22. States also want cess to be extended further.

Ratings agency ICRA estimated that GST compensation of another Rs 61,000 crore remained pending for the 10-month period of April 2020-January 2021, for which funding options were uncertain.

The GoM, headed by Meghalaya chief minister Conrad Sangma, had submitted its report on June 7.

ET reported that the eight-member group had recommended that the GST on vaccines be determined by the GST Council and had referred the matter back to the Council.

For Covid relief material such as medical grade oxygen, oxygen concentrators, pulse oximeters and Covid testing kits, the GoM suggested a 5% rate.

While the central government decided to procure vaccines for the states, opposition-ruled states are expected to maintain their demand of zero rating GST of Covid-19 vaccines.

The government on Monday announced that it would procure 75% of the manufacturers’ capacity and provide them free of cost to all states for vaccinating people aged 18 and above from June 21, while private sector hospitals can procure the remaining 25%.


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