GST — hits and misses

The GST Council in Lucknow on Friday was a landmark for being the first in-person meeting since the onset of the Covid-19 pandemic last year. The council that consists of the Union finance minister and her counterparts in all the states has rightfully extended concessional GST rates to several Covid medicines till the end of this year. The council’s decision to remove concessions from the devices needed for Covid treatment may not hurt the common man that much since most have already bought these items. Most hospitals, too, have bought them. The council has also thankfully exempted a few drugs to treat muscle atrophy from the purview of GST much to the relief of the patients. These are high-value drugs and the removal of tax might help patients to an extent, though limited, to bring down the prices.

The decision to impose 5% GST on the service of food delivery apps such as Zomato and Swiggy would surely be passed on to the consumer. However, its impact will be limited mostly to the urban middle class who use the services of these apps regularly.

However, the real miss of the GST Council has been the inability to even start the discussion on bringing petrol and diesel under the tax. During the briefing after the meeting the finance minister said with a ring of finality that as of now petrol and diesel would continue with the present structure of taxation that erased any hope of a structural downward revision of the two essential petro-fuels.

There is overwhelming support among the citizens in favour of moving the two items under the GST regime that would bring down the prices of petrol from Rs 100 or more a litre to Rs 75 and that of diesel from about Rs 90 to Rs 70, even if these were pegged at the highest 28% usually reserved for luxury goods. The rate at which the governments, both at the Centre and states, have depended on extracting revenues from these two fuels has taken the retail prices to levels unthinkable even some time ago. Ironically, a few research agencies have pointed out that the revenues collected from petrol and diesel have gone up to a level where it is possible to bring down the prices by more than Rs 8 a litre even without compromising on the budget estimates of revenue projections. It is time that the government starts looking for sustainable sources of revenue and stops treating petrol and diesel as the low hanging fruits in the tax orchard.