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Exclusive: GST Council to discuss Covid cess on power, pharma sector in Sikkim

The Council will examine a proposal to impose a Covid cess of 1 percent on the pharmaceutical sector turnover in the state for the current financial year as well as for 2022-23

The council will also discuss another proposal on imposition of Covid cess of 0.1 percent per unit power generation The council will also discuss another proposal on imposition of Covid cess of 0.1 percent per unit power generation

The upcoming Goods and Service Tax (GST) Council meeting on May 28 will discuss imposition of Covid cess on pharmaceutical and power sector in Sikkim to help the state raise revenues amid its dwindling fiscal situation caused by the pandemic.

According to a source close to the development, the Council will examine a proposal to impose a Covid cess of 1 percent on the pharmaceutical sector turnover in the state for the current financial year as well as for 2022-23.  

Similarly, the council will also discuss another proposal on imposition of Covid cess of 0.1 percent per unit power generation for the current as well as the next financial year in the state.  

The source pointed out that the proposal is part of the agenda of the GST council which will take a final call on the matter in the meeting. The move will help Sikkim mobilise additional revenues to the tune of over Rs 250 crore.  

It may be noted that the Sikkim chief minister Prem Singh Tamang wrote to Finance Minister Nirmala Sitharaman in late 2020 apprising the centre about the fiscal constraints the state was facing as an impact of the pandemic. Tamang also made a case for need of additional revenue mobilisation in the wake of the disruptions caused by the pandemic in the state.  

The state is expecting the revenues to dip by a third and expenditure also to go up significantly in the current financial year.  

On the rationale behind the move, a finance ministry official told BusinessToday.In on condition of anonymity, "Hydroelectric and pharma sector have a dominant presence in Sikkim and are significant to the economy of the state. Also, the pharma sector have faced minimal disruption due to the pandemic."   

GST laws empower the Council to allow a state to impose a cess in special circumstances. In a similar situation, Kerala was allowed by the council to impose a cess to raise revenues for 2018 flood rehabilitation work. 

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