NEW DELHI: The GST Council has said it will soon form Group of Ministers to examine allowing states to levy a Covid cess, especially those that have been hit by disasters and are dependent on the Centre for revenue.
The 43rd GST Council, chaired by Finance Minister Nirmala Sitharaman, sat on Friday to discuss compensation to states, the extension of GST cess beyond five years, and a reduction in GST for various Covid-related essentials, including vaccines.
Also on the agenda was the Sikkim government’s request seeking the imposition of a Covid cess on the power and pharmaceutical sector in the state for two years.
The move was supported by other states such as Arunanchal Pradesh and Goa. Arunachal’s finance minister supported the proposal and said that small states should be allowed to impose a cess since they have to depend on the Centre for 90 per cent of finances.
Sikkim had said that the move would help it mobilise additional revenues of over Rs 250 crore.
Sources said the finance minister had assured that a a Group of Ministers (GOM) would be formed to study the proposal.
The GoM will submit its recommendations after deliberation in two weeks.This is not for the first time that the Council is considering a state’s request to impose cess.
According to the GST Act, a special levy can be imposed for a specified period to raise additional resources to cope with natural calamities or other special circumstances.
In 2018, Kerala was allowed to impose a cess of 1 per cent on the sale of goods and services in the state for a maximum of two years.
However, experts claim that if Sikkim is allowed to levy a cess, other states will also come up with similar demand.
Many states such as Gujarat, Maharashtra, West Bengal, and Orissa have faced recent natural calamities.
The Council also rejected applying GST on Extra Neutral Alcohol (ENA). ENA is the primary input for the manufacture of alcoholic beverages for human consumption.
GoM on Covid essentials
On Saturday, the Council announced that the GoM that will examine GST on Covid-related medical goods will be headed by Meghalaya CM Conrad Sangma, with Gujarat deputy CM Nitin Patel, Maharashtra deputy CM Ajit Pawar, Kerala FM K N Balagopal, Telengana FM T Harish Roa, Odisha FM Niranjan Pujari, UP FM Suresh Khanna and Goa transport minister Mauvin Godinho as members.
The GoM will give its report on 8 June 2020.