Bengal has decided to call finance minister Nirmala Sitharaman’s bluff ahead of this week’s crucial meeting of the Goods and Services Tax (GST) Council meeting which is being held after a gap of over seven months.
Bengal finance minister Amit Mitra wrote a letter to Sitharaman in which he suggested that Covid vaccines, drugs and allied equipment like oxygen concentrators should be placed under the zero rated category under Goods & Services Tax (GST) — and such a proposal should be placed on the agenda for Friday’s meeting.
Mitra argued that this was the only way to achieve the objective of the proposal that Bengal chief minister Mamata Banerjee had floated as a way to lower the burden of costs on families battling the pandemic.
Sitharaman had recently scoffed at Mamata Banerjee’s suggestion in a letter to Prime Minister Narendra Modi in which the Bengal chief minister had suggested that the Centre ought to waive customs duty and GST on all Covid-related materials, including drugs, in order to break unnecessary choke points in the supply chain and manage the pandemic better.
At that time, Sitharaman had leapt into the fray firing a staccato of 15 tweets in which she poured scorn on Banerjee’s proposal. The burden of her argument was that if Banerjee’s suggestion was accepted, it would raise rather than reduce the costs of Covid drugs and other equipment.
“If full exemption from GST were given, the domestic producers of these items would be unable to offset taxes paid on their inputs and input services and would pass these on to the end consumers by increasing their price,” she said.
She argued that the levy of a nominal 5 per cent GST was in the interest of the domestic manufacturer of vaccines as well as the citizens of India.
On Tuesday, Mitra waded into the debate and explained why Sitharaman was wrong in making her assertions.
Speaking to The Telegraph this evening, Mitra argued that the intended relief could be provided if Covid- related materials were placed in the zero-rated category.
“There are items which are already zero rated such as supplies of goods and services meant for export or to special economic zones (SEZs). If Covid-related items are placed in this category, then the entire value chain will pay zero tax. There will not be any pressure on the manufacturers to pass on the input tax credit to the consumers as the Union FM has suggested in her tweets,” Mitra said.
Section 16 of the integrated GST provides for a zero-rated category of items. Mitra argued that there was a need to take a bold decision to mitigate the impact of the pandemic. Many of the items that Banerjee had alluded to currently attract a GST levy between 12 and 18 per cent, he added.
“The Chief minister wrote to the PM seeking relief for the common masses. By putting these items under zero rated category, such an objective will be achieved,” Mitra added.
