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Reduced GST on COVID-19 items, shrinking middle class, and subsidy for EV adoption: Three things Teji Mandi investors should know on June 14, 2021

05:54 PM Jun 14, 2021 | Teji Mandi

Reduced Taxes on COVID-19 Items

The GST council, accepting the recommendations of the Group of Ministers (GoM), has slashed the GST rates on several COVID-19 related items.

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It includes Remdesivir, Tocilizumab, medical-grade oxygen, oxygen generator, ventilators, masks, COVID testing kits, oximeters, hand sanitisers, cremation furnaces, ambulances, temperature checking devices, and others.

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After the latest GST council meeting, the GoM was constituted to discuss prospective COVID-related item reductions. New deducted rates shall be applicable till September 31, 2021. There will be no rate cut on COVID-19 vaccines like Covishield and Covaxin.

New changes in GST rates on COVID-19 items are expected to reduce the cost of such critical items for the end-users. However, rates of COVID-19 vaccines are kept unchanged. The logic here could be that since major vaccination is done by the government itself, change in GST rates is unlikely to impact the end cost.

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Shrinking Middle Class

The pandemic has left a massive scar on the economy, with many middle-class households witnessing a massive decline.

As per a recent estimate, nearly 3.2 crore people have fallen out of the middle-class category. And, the number of poor people (who earn less than Rs 150 or less a day) has increased by 7.5 crores.

The sharp reduction in income levels is truly reflected in the increasing level of unemployment. It would directly translate into the deteriorating incomes and spending pattern of the people.

Under this impact, many companies are fearing a significant shift in the consumption habits of people. The companies are likely to go through a tectonic shift in terms of change in consumption patterns. And, they would require to change their product offering accordingly to accommodate this new normal.

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Fastening EV Adoption

The government has revised the subsidy on electric vehicles by 50% to Rs 15,000 per kilowatt-hour from Rs 10,000 earlier. Cap on subsidy is also doubled to 40% from 20%, based on the price of the vehicles.

This announcement is a part of the Faster Adoption and Manufacturing of Electric Vehicles in India Phase II scheme (FAME-II). The scheme was announced to promote EV adoption in the country. It has a financial outlay of Rs 10,000 crore.

The scheme will help the EV two-wheelers to be more price-competitive with conventional vehicles. With that, they could find better acceptability and better penetration among the customers.

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