Full GST, customs duty exemption to vaccines, Covid related drugs counterproductive for industry, to hurt consumers: FM Nirmala Sitharaman


Finance minister Nirmala Sitharaman said that vaccines, Covid related drugs and oxygen concentrators cannot be fully exempted from goods and service tax (GST) since domestic producers of these items would be unable to offset their input taxes and would pass on to end consumers by increasing their prices.

She laid down the argument in a series of Twitter posts on Sunday, adding that a nominal tax was in the interest of manufacturers and citizens.

“If full exemption from GST were 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,” Sitharaman said in one of the Twitter posts.

She added that in case of vaccine manufacturers, a 5% GST rate ensures that they can utilise input tax credit (ITC) and in case of overflow of ITC, claim refund.

“Hence exemption to vaccine from GST would be counterproductive without benefiting the consumer,” she noted.

The minister was responding to demands by West Bengal chief minister Mamata Banerjee of full exemption from GST, customs duties and other taxes on items such as Remdesivir injections, oxygen cylinders, concentrators, cryogenic storage tanks and containers donated by various organisations. The newly elected chief minister had written to Prime Minister Narendra Modi on Sunday.

Sitharaman argued that more than 70% of the integrated GST collected was given to states.

“States end up receiving almost 70% of the total revenue collected from vaccines. In fact, a nominal 5% GST is in the interest of the domestic manufacturer of vaccine and in the interest of the citizens,” she said.

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She further added that COVID vaccines were being provided free of cost by the Centre to 45 years and above and to all frontline workers. On government supplies, GST is also paid by the government.

GST rates vary from 5% on vaccines to 12% on Covid drugs and oxygen concentrators. It is applicable to domestic supplies and commercial import of these items.

Sitharaman said that Centre had already granted exemption from IGST for imports, customs duty and or health cess on nearly two dozen items including Covid vaccines, Remdesivir injections, Remdesivir API, medical oxygen, oxygen concentrators and storage tanks. A notification to the effect was issued on May 3.

“This exemption applies to all above mentioned goods when imported free of cost for free distribution in the country by any entity, state government, relief agency or autonomous body on the basis of a certificate issued by a state government,” she said.

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, she noted.

“Full exemption from customs duties, including IGST, is already available to all COVID relief material (not confined to a list) imported by the Indian Red Cross for free distribution in the country,” she said.

Government has fully exempted from all duties imports of Covid vaccines, Remdesivir injections, Remdesivir API, and for a chemical for the manufacture of this drug, medical oxygen, besides 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, inflammatory diagnostic kits and reagents for Covid testing.

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