Amid GST recast, fresh push to cut tax slab for India's R&D institutes

New Delhi: While the latest and 56th GST Council meeting has ushered in significant relaxations across sectors, the country's many leading scientific institutions are still awaiting the undoing of the crippling blow dealt out to them at the 47th GST Council meeting in July 2022- with a 12%-18% GST rate vis a vis the concessional 5% before.

ET has learnt that Niti Aayog is now learnt to be strongly pitching for a much needed relief to scientific institutions- to ease purchase of critical scientific and technical equipment for their laboratories.

The push factor is recent and follows insights from latest surveys done across all scientific and academic institutes over the last few months on the 'Ease of doing R&D'.

The surveys have strongly pointed to the 'crippling' GST rate they are faced with in purchase of essential lab and scientific equipment, ET has gathered.

High-level discussions are now learnt to be underway to restore the pre-2022 concessional rate of 5%.

The concession, in fact, was permitted for all public-funded research institutions, laboratories of central and state governments and regional cancer centres.

Announced in November 2017, the idea behind the move was to reduce tax burden for research institutions precisely to help them fastrack R&D-linked procurement of scientific and technical instruments, equipment, accessories, computers, consumables, etc

Therefore, its sudden withdrawal announced in the 2022 GST council took the entire scientific community by surprise. triggering serious concerns over impact, especially on imports.

The same was, in fact, red flagged at several levels rightaway. The Office of Principal Scientific Advisor (PSA) also held consultations on the issue with NITI Aayog and stakeholder scientific departments and ministries, ranging from CSIR, DBT, DST, ICAR, ICMR, Ministry of Earth Sciences to MeitY.

The office of the PSA also prepared a note - R&D Tax incentive in India-Recent changes in GST Rates, its estimated impact and way forward - on the issue to draw attention to the adverse effect of the withdrawn concessional GST rate.

It was pointed out that while the private organizations may gradually absorb the impact of rate changes, there is a limited space for public funded organisations to absorb the impact.

The primary impact of the GST rate change is on imported equipment as it constitutes a major portion of procurement of scientific equipment, the government, itself, shared in reply to a 2023 question in Parliament.

At that time, the Department of Expenditure held that it would make additional allocations of funds to cover the actual impact of GST changes.

However, three years down the line, the 'as per actuals' GST barrier of 12%-18% continues to be a major pain point.