Another GST Council meeting on Tuesday to decide if 'Covid items' can be exempted from tax

Neither officials nor the GST Council (comprising mostly CMs or finance ministers of states) could agree on reducing tax on medical equipment to deal with Covid. An eight-member Group of Ministers was set up by the Finance Ministry to resolve the issue before June 8, when the GST Council is to meet again.

But why eight members? And what was the basis of selecting the members representing eight states? Why were all three finance ministers of Congress-ruled states of Rajasthan, Punjab and Chhattisgarh left out? And can a GOM or a GIC (GST Implementa-tion Committee comprising officials) prevail over the GST Council?

The GOM, significantly, comprise ministers from Meghalaya, Goa, Uttar Pradesh, Gujarat, Odisha and Telangana. Kerala and Maharashtra are also included but the two states would clearly be overruled by the six states in the GOM from either BJPruled states like UP, Gujarat, Goa and Meghalaya or from states like Odisha and Telangana ruled by NDA allies.

Punjab finance minister Manpreet Badal wrote a letter to Union Finance Minister Nirmala Sitharaman to point out that neither a GOM nor the GIC can under the law replace the GST Council. He had suggested in good faith, Badal’s letter points out, that all decisions taken by the GIC be approved by the GST Council so that legal challenges are avoided. But his suggestion was apparently not taken seriously.

“I had expected the GST Council would have the boldness to address a once-in-a-hundred-year event like the Covid pandemic. You cannot impose an 18 per cent GST on hand sanitisers,” quipped West Bengal Finance Minister Amit Mitra after the ninehour long deliberation on May 28, voicing his disappointment .

While vaccines and cotton masks attract 5% GST, other items like testing kits, drugs, medical oxygen, oxygen concentrators and ventilators, attract 12% GST. Alcohol-based sanitisers, hand wash, disinfectants and thermometers are in the 18% tax slab.

While group of officers had managed to arrive at a consensus on bringing down the GST on medical grade oxygen, oxygen concentrators, Covid testing kits and pulse oximeters from 12% to 5%, no consensus could be forged on rate cuts for hand sanitisers (18%), ventilators (12%), RTPCR kits (18%), RNA extraction machine (18%) and genome sequencing machine (12-18%).

While finance ministers of several states wanted zero tax on these items in view of the once-in-a-century pandemic, several BJP ruled states like Goa vociferously opposed it. When Mitra’s proposal to fix a zero tax rate on Covid related products was blocked by the Centre, the West Bengal finance minister threatened to write a note of dissent. This would have been the first dissent note in the three-year history of the Council. That is when it was proposed to constitute a GOM to look into the matter.

The proposal to have a Zero tax received support from nine states while three other ministers lobbied for a flat 5% GST on all Covid products. The Union Government was not willing to budge from the agreement hammered out by the officials earlier. It also ruled out a proposal to promulgate an ordinance and impose a 0.1 tax rate on the products.

Tamil Nadu finance minister P. Thiagarajan got into a spat with Goa’s transport minister Mauvin Modinho, who he alleged was delivering a political speech and speaking of ‘national interest’. Why should the minister from a small state like Goa cast aspersions on the ministers from much bigger states, he wondered.

Thiagarajan later took to Twitter to say that while Finance Minister Sitharaman silenced him by saying no state was big or small but were equal, he still believed that ‘one state, one vote’ rule in the GST Council was flawed. Stakes of industrialised states and bigger states like TN, he felt, could not be deemed at par with smaller states like Goa.

This provoked the minister from Goa to say that the TN’s finance minister had insulted Goa and was behaving like a ‘Big brother’. He demanded an apology from Thiagarajan and action against him by the TN chief minister.

Thiagarajan retaliated with a caustic statement addressed to the people of Goa. The representative of India’s smallest state, the statement read, “was vociferously, and repeatedly, speaking against lowering the GST on Covid-related drugs & vaccines from 5% to 0% on humanitarian grounds… I found his statements during the meeting to be highly repetitive, largely vacuous, hectoring, mostly redundant to others’ inputs, supercilious, and devoid of the basic courtesy of assuming good faith in the comments of other states’ Ministers.”

The statement ended by offering “sincere condolences” to the people of Goa “for having such a person as your minister” and with an advice to the BJP to adhere to some quality control while ‘acquiring’ MLAs.

All eyes are now fixed on the next GST Council meeting on June 8. Will it be as acrimonious as the last one?