GST exemption on domestic supplies, Covid drugs to make them costlier: FM


GST exemption on domestic supplies, Covid drugs to make them costlier: FM

Finance minister Nirmala Sitharaman recently stated that GST exemption to domestic supplies and commercial import of Covid 19 drugs, vaccines and oxygen concentrators would make these items costlier for consumers as manufacturers would not be able to offset the taxes paid on inputs.

Presently, domestic supplies and commercial imports of vaccines draw up a five per cent Goods and Services Tax (GST), while it is 12 per cent in case of Covid drugs and oxygen concentrators.

Sitharaman also stated, "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 per cent GST rate ensures that the manufacturer is able to utilise and in case of overflow of ITC, claim refund. Hence exemption to vaccine from GST would be counterproductive without benefiting the consumer ".

Furthermore, if Integrated GST (IGST) 100 is collected per item, 50 accrues to the centre and the States each as Central GST and State GST correspondingly, in addition 41 per cent of the revenue is passed to States. So out of a collection of 100, as much as 70.50 is state's share.

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 transferred to the States. So states end up accepting 70 per cent of the total revenue collected from vaccines.

"In fact, a nominal five per cent GST is in the interest of the domestic manufacturer of vaccine and in the interest of the citizens," stated Sitharaman.

Also, Integrated GST (IGST) is also exempted on all Covid relief material imported by the Indian Red Cross for free distribution in the country. Moreover IGST exemption has been given in case of goods when imported free of cost for free allotment in the country by any entity, state government, relief agency or autonomous body on the basis of a certificate issued by a state government. "In order to augment the availability of these items, government has also provided full exemption from basic customs duty and health cess to their commercial imports," stated Sitharaman.

The government has spared from customs duty import of a host of Covid related relief materials, including Remdesivir injection and its APIs, Inflammatory diagnostic (markers) kits, medical grade oxygen, oxygen therapy related equipment such as oxygen concentrators, cryogenic transport tanks, etc, and Covid vaccines.

In addition, effective on May 3, the government exempted IGST on import of Covid-relief material received as donation for free distribution in the country, a stir which helped speed up customs clearances of such imports. This exemption would be subject to nodal authorities, appointed by the state governments, authorising any entity, relief agency or statutory body, for free allocation of such relief material. The goods can be imported free of cost by a state government or, any entity/ relief agency/ statutory body, authorized in this regard for free supply all over India.