Schism in GST Council out in the open

 







The Goods and Services Tax (GST) Council, which used to adopt the route of consensual decision-making, appears to be a divided house now. Exposing the schism in the Centre-state body, two state finance ministers – West Bengal’s Amit Mitra and Punjab’s Manpreet Singh Badal – have made statements sharply criticising the council’s way of functioning. The Coucil, which met last Saturday, announced temporary tax cuts for a clutch of Covid-19 items but retained the rate for vaccines at 5%.

In a series of tweets on Saturday, Badal not only reiterated the demand for ‘zero-rating’ of Covid drugs, vaccines and materials, but called it ‘preposterous’ to exclude the Congress party from the group of minsters (GoM) concerned and called for operationalising the position of vice-chairperson of the GST Council. “Council must have its own secretariat, and Dispute Resolution Mechanism,” he opined.

West Bengal finance minister Amit Mitra, who has been vocal against the way the council takes decisions of late, on Monday reiterated his demand for zero rating or having a nominal 0.1% GST rate for all key Covid-19 medicines, vaccines and materials required to fight the pandemic. He alleged that the Council and the GoM had become ‘authoritarian’ and ‘majoritarian’ in their approach. “It (the council) functioned by consensus till a certain point of time. And today, that is breaking down,” he averred.

Potential revenue loss for the proposed zero rating for Covid essentials would be ‘absolutely minuscule’, according to Mitra.

“If you cannot do zero rating because you don’t want to do an ordinance, which you had done for three farm laws, you put 0.1% rate, which is practically zero. This is an issue in which we require consensus for the people of India,” Mitra said during a virtual press conference.

The Centre has been holding the view that zero rating of vaccines is redundant given that the vaccination is free of cost to the people via the government channels. Nil tax rate is not compatible with the GST system which relies on a continuous value chain till the retailer and derives its strength from a seamless input tax credit mechanism, the Centre points out.

The tax cuts announced by the GST Council last Saturday will be effective till September 30. The GoM led by Meghalaya chief minister Conrad Sangma recommended slashing of GST rates for items other than vaccines.

Mitra said Union finance minister Nirmala Sitharaman had not yet responded to his letter in which he said states would need an additional GST compensation of around Rs 63,000 crore for the financial year 2020-21. “What they (Centre) had released (to states) is based on 7% notional growth of revenue. But, all of you know that the notional rate is irrelevant, real growth is available, which is -3%. So, if the revenue growth is -3%, additional Rs 63,000 crore become necessary for the states, and out of which West Bengal expects nearly Rs 5,000 crore,” he said.

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