GST Exemption will Increase Price of Covid-19 Related Medicines: FM India

In yet another incident on Sunday, the Finance Minister Justified her perception on waiver of GST on Vaccines, COVID drugs, and Oxygen concentrators. She commented that GST exemption on

• Domestic Supplies of Vaccines
• Commercial Imports of Vaccines
• COVID Drugs
• Oxygen Concentrators

would make the aforesaid items even costlier owing to the fact that manufactures would not be able to offset aforesaid taxes that would have been paid on inputs.

At Present GST Rate is as follows

• Currently, domestic supplies of Vaccines attract 5% GST
• Commercial Imports of Vaccines attract 5% GST
• Covid drugs attract 12% GST
• Oxygen Concentrators attract 12% GST

“If full exemption from GST is given, vaccine manufacturers would not be able to offset their input taxes and would pass them on to the end consumer/citizen by increasing the price. A 5 percent GST rate ensures that the manufacturer is able to utilize ITC and in case of overflow of ITC, claim the refund. Hence exemption to the vaccine from GST would be counterproductive without benefiting the consumer, Sitharaman tweeted.”

Sitaraman further clarified the issue using simple mathematical reasoning If integrated GST is Rs 100 on an item

• Rs 50 goes to the exchequer of Central GST and State GST respectively
• In the second step, 41 % of CGST goes to goes to the exchequer of States
• In essence Rs 70.50 is the share of states

Moving to GST collection from vaccine, the same mathematical reasoning applies

Moving to West Bengal, West Bengal Chief Minister Mamata Banerjee on Sunday wrote to Prime Minister Narendra Modi a letter that sought exemption from GST as well as customs duty from

• Any donations of cylinders, oxygen concentrators, cryogenic storage tanks
• Drugs of Covid from organizations or agencies

The Finance Minister answered the question of aforesaid matter by tweet claiming that the above-mentioned items are already exempted from customs duty in addition to exemption from health cess. Moreover, Integrated GST (IGST) has already been exempted on all relief material (of COVID ) that is imported by the Indian Red Cross for free distribution in the country. IGST exemption has also been given in the case of goods when they are imported free of cost for free distribution across the country by any entity, relief agency, state government, or autonomous body on the criteria of a certificate issued by a state government.

“In order to augment the availability of these items, the government has also provided full exemption from basic customs duty and health cess to their commercial imports, Sitharaman said.”

Previously, The government has already provided exemptions for the below-mentioned items

• Remdesivir injection and its APIs,
• medical grade oxygen,
• Inflammatory diagnostic (markers) kits,
• Covid vaccines
• oxygen therapy-related equipment such as oxygen concentrators and so on

In addition from May 3 onwards, the government has already provided exemption from IGST on import of Covid-relief material received as a donation for free distribution in the country. And this move has helped in speedy custom clearances of the abovementioned imports. The aforesaid goods could have been imported free of cost either by a state government or, any other entity that is authorized in this regard for free distribution across India.