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New Delhi: The Goods and Services Tax (GST) Council on Friday extended tax concessions on a host of imported donations of medical supplies by two more months till the end of August and decided to set up a ministerial group to examine demands for tax relief on locally produced covid-related medical supplies.

On 3 May, the government waived for two months integrated GST (IGST) on certain medical supplies donated from abroad for free distribution, including covid vaccines, oxygen and related equipment, and diagnostic kits. The GST Council on Friday extended this benefit, which was available till June end, till the end of August, and also made it applicable even if they are imported on a payment basis to be donated to a government agency. Also, in view of rising black fungus cases, IGST exemption has been extended to a drug used in its treatment, Amphotericin B, said an official statement.

Union finance minister Nirmala Sitharaman said after a meeting of the GST Council that the federal indirect tax body has also decided to continue for another year a borrowing arrangement to meet the GST compensation requirement of states. The broad estimate is that the Centre may have to borrow 1.58 trillion to meet the GST compensation requirement, as funds collected as GST cess on items such as cars and aerated drinks may not be sufficient for this.

The council also decided to offer compliance relief to small and medium businesses by way of an amnesty scheme to make good past defaults in filing tax returns. It also capped the late fee applicable in the future on delayed tax returns.

The council decided to reduce GST from 12% to 5% on diethylcarbamazine tablet used in a WHO programme for lymphatic filariasis elimination. Also, the 5% GST rate applicable on aircraft maintenance, repair and overhaul units will now be offered to those in the shipping sector, too, bringing it down from the current 18%.

Sitharaman explained that the ministerial group to be set up to review proposals for reducing the tax rate on vaccines and a host of medical items used in prevention and treatment of covid-19 will give its report by 8 June.

“There was protracted discussion on it, with varying viewpoints. I have decided and announced in the council to have a group of ministers to be quickly formed which will submit its report on or before 8 June so that if any further reductions need to be done, they will be done. The rates will be decided by them," Sitharaman said, adding that the group will be set up on Saturday.

This puts to rest the controversy over some of the states demanding upfront GST exemption or zero-rating of tax on vaccines and other supplies, which was not in line with the philosophy of GST.

The council also capped the late fee for defaulting on filing monthly summary of transactions (form 3B) between 1 July 2017 and April 2021 at 500 for those having no tax liability to be met and at 1,000 in the case of others. The maximum late fee so far was 10,000. This benefit will be applicable if the returns for the period is filed between 1 June and the end of August.

The same lower late fee is also offered in prospective defaults, too, in the case of taxpayers with no tax liability to be met. For those having a liability to be met, the cap is fixed at 2,000 if annual sales are up to 1.5 crore. If it is between 1.5 crore and 5 crore, the maximum late fee is set at 5,000. Relief on the interest rate for delayed tax payment has been offered for March and April, too.

“Waiver from the late fee in addition to the reduction in interest and penalties will help the government get closer to targets for GST collection and at the same time make it attractive for taxpayers to finish pending compliance," said Archit Gupta, founder and chief executive of ClearTax, an online tax service provider.

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