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May 26, 2020

Govt has no plan for Covid19 Cess on GST nor any plan to waive GST on PPEs, mask, etc

by facelesscompliance in GST

Govt has no plan for Covid19 Cess on GST nor any plan to waive GST on PPEs, mask, etc

The Government has no plans to impose Covid19 Cess on GST for raising revenue to deal with pandemic the country is facing.

There have been stories in the media claiming that the central government is planning to impose Covid Cess which are false. Government says any such proposal would be counter-productive at the time sales are low and industry is facing crises for want of labour and demand. Tinkering with the taxes or cess would not be a prudent option at this point. The govt officals said that any such measure would further dampen consumer sentiments and could weaken market strength.

The government is not in favour of granting Goods and Services Tax (GST) waiver, as has been demanded by various sections of the industry

In the past, when the GST exemption on sanitary napkins was allowed, it had led to similar hardship for domestic manufacturers of sanitary napkins. Later, the domestic industry complained of adversity, because of GST exemption would lead to blocked input tax credit (ITC) resulting in increase in the cost of manufacturing and a higher price for consumers. So was the case with GST exemption on PPEs, mask, etc,. which can lead to increase in cost

While GST exemption would make output GST as zero, the ITC would not get utilised and would get added to the cost, which will harm the industry and also the consumers which will not help in reviving the demand.

The compliance burden is expected to increase for manufacturers who would be required to maintain separate accounts for inputs and capital goods used for the production of the item for which exemption on ITC may not be allowed

GST waiver provides incentive for imports, which do not have input taxes as compared to domestic supplies making imported goods cheaper than locally produced goods. 

The government has released close to Rs 1.35 lakh crore to states and union territories towards GST compensation cess.

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