Govt has announced relaxations in GST compliance. Right now, Price controls have been imposed on various essential commodities. Thus, it also announced exemptions on customs duties and health cess for some products.
1. Hospital services are exempt from output GST
However, hospitals incur several input taxes including GST on capital procurement of equipment and recurring GST on medical devices/ items/drugs and services such as rent/marketing/R&D. As ITC facility is not available for exempt-supply, these credit are built into the price. Now this exemption would reduce the cost of service and deliver benefits to patients. Similarly, private healthcare premiums are currently taxed @18% rate. Through exemptions of GST, private insurance can also be made affordable.
2. Routine business activity post-recovery may encounter several hurdles under GST:
i) Disruptions will lead to non-performance of contracts. Parties may commercially settle liability contractually through liquidated damages or arbitration. The department has typically demanded GST on settlement amounts as “Acts of toleration”.This would delay dispute resolution.
ii) Companies have actively assisted in relief efforts in response to the government’s call to action. Manufacturers of essential items such as masks and FMCG retailers have distributed a portion of their inventory as relief. ITC on such items may not be available as a blocked credit.
iii) The auto sector will be key to any post-crisis recovery. Auto entities scrapping existing inventory under newly introduced BS-VI standards may also need to reverse ITC, a double blow to this critical sector for a bona fide policy change.
iv) A rebound in exports is also essential. Exporters hitherto had the option of filing applications under SEIS for FY17 until March 31. There is ambiguity if this date has also been extended till 31st December. Currently, there is already a significant backlog of SEIS applications. Delay in disposal and lapse will further hurt service exporters. Pro-active redressal will, thus, go a long way.
3. Some suggestions
Rather than digital signature filing of applications should be done with Aadhar-linked electronic verification code (OTP). Exemption from uploading invoices for GST refund should be given. Scanned copies of instead of actuals should be considered.