[‘Daily News Updates’ will provide you with a simplified understanding of the important economic/financial events across the country]
GST Council to meet today; GoM Report to be discussed
The GST Council Meeting, chaired by Union Finance Minister Nirmala Sitharaman, will be held today to discuss a range of issues like rate cuts on medical supplies and compliance reliefs for small businesses. [The GST Council comprises of state finance ministers and is chaired by the Union finance minister]. It will look into the recommendations of a Group of Ministers (GoM), which was set up in the Council’s last meeting on 28th May to recommend GST exemptions on vaccines, essential drugs, ventilators, medical oxygen, masks, etc. in the context of COVID-19.
Read- GST: Demystified and The Final Structure of GST
For COVID-19 vaccines currently approved in India, a 5% GST is levied. While states do not have to bear this burden from 21st June 2021 (as the centre will procure 75% of the vaccines), there is no relief yet for the private hospitals that will procure the rest of the vaccines.
Similarly, for medical oxygen and other supplies like testing kits and oximeters, the rate currently stands at 12%, which is expected to be lowered to 5%. However, states demand that these items should be wholly exempted too. [5% is considered the ‘merit’ rate and is applied to most essential items like transport services, kerosene, edible oil, etc.].
Besides, small businesses also expect a framework for quarterly tax payments. Currently, while they can file returns quarterly, payment of taxes has to be done monthly. Thus, even this may be discussed in the meeting today. We will keep you updated with the decisions in tomorrow’s edition of Daily News Updates.
In the meeting held on 28th May, the Council left the taxes on medical supplies and vaccines unchanged. While the Union Government believes that exempting vaccines from GST will be counter-productive, the states argue that the relief should be considered amid the pandemic. The Union Government argues that a GST exemption will prevent the manufacturers from availing Input Tax Credit (ITC). What does this mean?
As mentioned earlier, GST is a uniform tax levied on value-added. Levy at each stage of sale/ purchase will be set-off against taxes paid by the supplier in the previous stage. Through this set-off mechanism, GST is levied only on value-added. To illustrate: Let’s say GST is 10 %. Continuing with our earlier example, if you make a packet of chips (manufacturer) and sell it for Rs. 30, your GST should come out to be Rs 3 (10 % of Rs. 30). But this tax is levied only on value-addition and so you’ll be allowed to claim a tax credit to the value of GST already paid by the supplier in the previous stage. Let’s say you bought raw materials (potatoes etc.) worth Rs. 10 for making chips. The supplier of the raw materials has already paid Re. 1 (10 % of Rs. 10) as GST. So, the chips manufacturer can claim a tax credit of Re. 1 and pay only the remaining Rs. 2 as GST. Thus, there is no cascading effect and no burden of ‘tax on tax.’
Source- /goods-and-services-tax-gst-demystified/
But this credit is not available for exempted supplies. Thus, the vaccine manufacturers will cover their tax payments (on inputs) by increasing the price per dose of the vaccines (which hasn’t been capped for private hospitals) and ultimately hurting consumers.
On the other hand, many experts argue that the Government can use the concept of ‘zero-rated supplies,’ which is currently available only for export of goods and services or supply to Special Economic Zones (SEZs). When an export is ‘zero-rated,’ no GST is levied on it, but the seller can claim ITC. The provision exists as a special measure to boost exports and businesses in SEZs.
Database for Migrant Workers Delayed; Centre tells SC
Last year, after the lockdown was imposed in March, India faced an unprecedented migrant workers crisis. We had published an article on the situation- “The pictures of the migrant workers walking hundreds of kilometres with families and kids have become the defining images of India’s fight against corona. The lockdown enforced due to the coronavirus outbreak led to a mass exodus of migrant workers from the cities to villages.” Most importantly, the article also noted that “due to informality and circularity, the Government has no database of internal migrants. Therefore, the Government’s welfare measures for the vulnerable sections of society do not reach them.” We had also suggested that every state Government must maintain a database of migrant workers. In the same month, the Central Government decided that a national database of unorganised sector workers (a large proportion of which are migrant workers) will be created and maintained.
The funding for this ambitious project was cleared in October 2020 by the Finance Ministry, and the database was to be functional in June 2021. However, the Government has informed the Supreme Court that the database will be functional in another three-four months, citing the second wave of the pandemic as the major reason for the delay. So how will the database help the workers?
It will have details of different social sector and welfare schemes run by the central and state governments targeting the unorganised sector workers. Besides this, the workers will also be able to avail of the benefits of these schemes by registering and applying through this portal.
Source- //theprint.in/india/governance/modi-govt-needs-3-4-months-to-roll-out-database-of-migrant-labour-sc-asks-why-the-delay/676312/
A migrant worker will be able to self-register using his mobile or going to the nearest service centre. They will be given a registration card with a unique account number. The Government also plans to link this database to different ministries to deliver services directly to the unorganised sector workers.
Economyria is now on Telegram. For a simplified analysis of topics related to economy/ business/ finance, subscribe to Economyria on Telegram