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Full exemption of vaccines, drugs from GST to hurt consumers: FM

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    Full exemption of vaccines, drugs from GST to hurt consumers: FM

    Nirmala Sitharaman   –  Swapan Mahapatra

    Finance Minister Nirmala Sitharaman, on Sunday, ruled out full exemption of Goods & Services Tax (GST) on Covid-related vaccines, drugs, oxygen concentrators as it will hurt consumers.

    Sitharaman’s response comesafter West Bengal Chief Minister Mamata Banerjee wrote a letter to Prime Minister Narendra Modi seeking exemption.

    In a series of tweets, the Finance Minister said that GST at rates varying from 5 per cent (on vaccines) to 12 per cent (Covid drugs, oxygen concentrators) is applicable to domestic supplies and commercial import of these items. According to her, if IGST of ₹100 is collected on an item, ₹50 accrues to the Centre and the States each as CGST and SGST. Further, 41 per cent of the CGST revenue is devolved to States. So, out of a collection of ₹100, as much as ₹70.50 is the States’ share.

    “If full exemption from GST is given, the domestic producers of these items would be unable to offset taxes paid on their inputs and input services and would pass these on to the end consumers by increasing their price,” she said.

    Earlier, Banerjee, in her letter to the Prime Minister, said that many of the donors and agencies have approached the State government to consider exemption of oxygen concentrators, cylinders, cryogenic storage tanks, tankers, tank containers and Covid-related drugs from custom duty/SGTS/CGST/IGST.

    Relief materials

    Giving her response to the letter, Sitharaman said that custom duty and IGST exemption on import of Covid relief materials have already been notified on May 3. These items need to be imported by the Indian Red Cross for free distribution in the country. From the same date, full exemption from all duties has been provided to Remdesivir injections, Remdesivir API, and for a chemical for the manufacture of this drug. The same will be applicable to medical oxygen, equipment used for the manufacture, storage and transportation of oxygen, equipment used for providing oxygen therapy to Covid patients such as oxygen concentrators, ventilators, non-invasive oxygen masks, along with inflammatory diagnostic kits and reagents for Covid testing and vaccines.

    “This exemption applies to all above mentioned goods when imported free of cost for free distribution in the country by any entity, State govt, relief agency or autonomous body on the basis of a certificate issued by a State government,” said Sitharaman, while adding that full exemption from basic customs duty and health cess to their commercial imports is also available.

    Talking about Covid vaccines, she said that GST is paid on government supplies by the government. From the GST collected on vaccine, half is earned by the Centre and the other half by the States. Further, 41 per cent of Centre’s collections also get devolved to the States. So, States end up receiving almost 70 per cent of the total revenue collected from vaccines.

    She clarified that GST at 5 per cent is in the interest of the domestic manufacturer of vaccine and citizens. If full exemption from GST is given, vaccine manufacturers will not be able to offset their input taxes and will pass them on to the end consumer/citizen by increasing the price. “A 5 per cent GST rate ensures that the manufacturer is able to utilise ITC and in case of overflow of ITC, claim refund. Hence, exemption to vaccine from GST will be counterproductive without benefiting the consumer,” she said.

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