Covid drugs cheaper, food delivery companies are required to pay taxes
Rate cuts for a number of cancer and Covid-related drugs and a shift in responsibility for paying taxes to restaurant delivery aggregators such as Swiggy, Zomato, and cloud kitchen operators instead of restaurants, were two of the key decisions made by the Goods and Services Tax. (TPS) at its meeting in Lucknow on Friday.
The Council, which met in person after 20 months, also decided to maintain the compensation tax only for the repayment of sums borrowed beyond June 2022.
A proposal to place petroleum products under the indirect tax regime was discussed, but it was decided to keep the proposal out of scope for the time being.
In the future, the Council will consider tariff rationalization under the reverse tariff structure and compliance measures through electronic waybill and dialing systems, for which two groups of ministers will be formed.
Finance Minister Nirmala Sitharaman said the rate cut relief granted at the previous council meeting for Covid-related drugs such as Remdesivir, Tocilizumab, Amphotericin B and blood thinners like l ‘Heparin will continue until December 31. However, the concessional tax for medical equipment will end on September 30.
The council also decided to remove the GST on the import of muscle atrophy drugs like Zolgensma and Viltepso, which cost millions of rupees, Sitharaman said. The GST rate for Keytruda, used for cancer treatment, has been reduced from 12 percent to 5 percent.
As of January 1 of next year, the Council decided to make e-commerce operators engaged in catering activities subject to payment of the tax. This will essentially shift the responsibility of paying the 5 percent GST to restaurant aggregators.
“Food delivery operators like Swiggy who collect orders from restaurants and deliver (to customers)…; where the food is delivered will be the point on which taxes will be collected by Swiggy concert groups and others, ”Sitharaman said.
Revenue Secretary Tarun Bajaj said, “There is no additional tax, there is no new tax. The tax was payable by restaurants, now instead of restaurants, the tax will be payable by aggregators, which will also prevent… revenue leakage.
The Board also decided to end the compensation mechanism in June 2022, as provided for by law. The levy of the compensation tax will continue from July 2022 until March 2026 to ensure the service of the loan which was used to close the compensation gap during the years 2020-21 and 2021-22 .
Debt for compensation payments to states is estimated at around 2.7 lakh crore, a senior finance ministry official said.
Sitharaman said that at the previous GST Council meeting, it was decided that beyond July 2022, the levy of the tax would be for “payment of loans taken out.”
“It (compensation to states) ends with five years. The five-year (period) ends in July 2022. Beyond July 2022, the money we collect, as agreed at the 43rd Board meeting, was for loan repayment. It starts in July 2022 and continues until March 2026 – only and only to pay off the loan given to states since last year, ”she said.
States were guaranteed GST compensation for the revenue gap between actual collections and the protected amount based on a compound rate of 14% from the 2015-2016 base year during five years after the deployment of the GST, until June 2022. Last year, the government decided to borrow to fill the compensation gap through state-backed loans.
For the inclusion of fuel in the GST, the Union Minister of Finance said that the Council had only discussed the matter because the High Court of Kerala had requested it, but found that it was not was not the right time to include petroleum products in the GST.
“It will be reported to the High Court of Kerala that this has been discussed and the GST Council felt that now was not the time to introduce petroleum products into the GST,” she said.
To correct the reverse tariff structure, changes to the GST rate will be made for the footwear and textiles sector, but the decision has been postponed for implementation until January 1 of next year.
The Council also reduced the GST rates on fortified rice grains to 5 percent from 18 percent, and on biodiesel for blending into diesel to 5 percent from 12 percent. National license fees for the transport of goods have been exempted.
The GST on ores and concentrates of metals such as iron, copper, aluminum and zinc has been increased from 5% to 18%, and that on specified renewable energy appliances and parts from 5% to 12%.
Cartons, boxes, bags and paper packaging containers will now be subject to a flat tax of 18 percent instead of the 12 percent and 18 percent rates. Waste and scrap of polyurethanes and other plastics will also see the tax increase to 18% from 5% currently.
All types of pens will be billed at an 18 percent rate, while various paper products such as cards, catalogs and printed materials will see the GST drop from 12 percent to 18 percent. The rate for soft fruit drinks and soft drinks with fruit juice will result in a 28 percent GST rate, plus a 12 percent offset tax.
The 12 percent IGST on the import of the drugs Zolgensma for spinal muscular atrophy and Viltepso for Duchenne muscular dystrophy has been lifted. These drugs cost up to Rs 16 crore.
The IGST exemption was also granted on goods delivered to the Indo-Bangladesh border areas. The importation of leased aircraft was also exempt from payment of the IGST.