The crucial meeting of the GST Council to decide on extending tax concession to 11 COVID-19 drugs and review tax rates of over 4-dozen items, like oncology medicine and coconut oil, began in Lucknow on Friday.

The 45th meeting of the GST Council, chaired by Finance Minister Nirmala Sitharaman and comprising state finance ministers, is the first physical meeting since the onset of the COVID-19 pandemic. The last such meeting took place 20 months ago on December 18, 2019.

Friday’s meeting does not have the provision of video conferencing and almost all state finance ministers, except Gujarat, are attending the meeting.

It will deliberate on the proposal of extending the existing concessional tax rate structure on Amphotericin B, Tocilizumab, Remdesivir and anti-coagulants like Heparin, till December 31, 2021, from the present September 30.

Tax rate on Amphotericin B, Tocilizumab was cut to ‘Nil’, while Remdesivir and Heparin was reduced to 5 per cent in June 2021.

The council will on Friday also discuss the proposal of reducing GST from 12 per cent to 5 per cent to the seven more drugs till December 31, 2021.

These are Itolizumab, Posaconazole, Infliximab, Bamlanivimab and Etesevimab, Casirivimab and Imdevimab, 2-Deoxy-D-Glucose and Favipiravir.

Also, taxing petrol and diesel under the single national GST tax.

The demand of some States, including the host State Uttar Pradesh, to introduce a new tax system for industries such as brick kilns, gutkha and paan masala, and sand mining, based on production capacity instead of actual output, may also be taken up at least for one or two of these sectors. Instances of tax evasion in these sectors have been quite rampant.

Some States, including Kerala, are expected to seek an extension of the five-year compensation period for implementing GST that expires next June and raise concerns about their revenue constraints since the tax was introduced in 2017.

Ms. Sitharaman had earlier promised States that a separate meeting of the council would be held to discuss compensation-related issues. While such a meeting may still be on the cards later, Friday’s agenda item on compensation will kick off the parley between the Centre and the States, informed sources said.

The council is also likely to take a call on Sikkim’s request to be permitted to levy a small cess on power generation and pharmaceutical products to raise about ₹300 crore and cope with COVID-induced fiscal stress.

A ministerial group of the council had examined the State’s request and urged the Centre to grant some additional funds to the small State. Kerala Finance Minister K.N. Balagopal, who was part of the group, however submitted a dissent note, highlighting that this reflects the transfer of taxation powers to the Centre and other States may face similar crises in the future.

The recent Supreme Court verdict disallowing input tax credit for services used in making products with an inverted duty structure may also come up for discussion, though a resolution of the issue is unlikely.