The Union Finance Minister Smt. Nirmala Sitharaman said that the Goods and Services Tax (GST) exemption to domestic supplies and import of oxygen concentrators, COVID-19 drugs and vaccines would make these items costlier as manufacturers would not be able to offset the taxes paid on inputs. Domestic supplies and imports of vaccines attract a 5% GST whereas COVID-19 drugs and oxygen concentrators attract 12% GST.
The Union Finance Minister clarified that if full exemption from GST is given, vaccine manufacturers would not offset their input taxes and pass them on to the end consumer by increasing the price. Charging a 5% GST rate ensures that the manufacturer can utilise Input Tax Credit (ITC) and claim the refund in case of overflow of ITC. Hence, the exemption to the COVID-19 vaccine from GST would be counterproductive without benefiting the end consumer.
She further said that if Integrated GST (IGST) Rs.100 is collected, Rs.50 accrues to the Centre and the States each in the form of Central GST (CGST) and State GST (SGST), respectively. Further, 41% of the CGST revenue is devoted to States. Hence, out of a collection of Rs.100, more than Rs.70 is going as states’ share.
From the GST collected on vaccines, half is earned by the Centre and the other half by the States. Further, 41% of the Centre’s collections also get devolved to the states. Hence, states end up receiving almost 70% of the total revenue collected from vaccines. GST of 5% is charged in the interest of the domestic manufacturer of vaccines and to benefit the citizens.
West Bengal Chief Minister Mamata Banerjee sought exemption from GST and customs duty on donations of oxygen concentrators, cylinders, cryogenic storage tanks and COVID-related drugs from organisations or agencies. In reply to this, the Union Finance Minister tweeted that these items are already exempted from customs duty and health cess to augment the availability of these items.
The government has exempted from customs duty on importing a host of COVID-19-related relief materials, including Remdesivir injection, Inflammatory diagnostic kits, medical-grade oxygen, oxygen therapy-related equipment such as oxygen concentrators, cryogenic transport tanks, etc., and COVID-19 vaccines.
It has been informed that the IGST is also exempted on all COVID-19 relief material imported by the Indian Red Cross for free distribution in the country. Also, IGST exemption has been given in case of goods imported free of cost for free distribution in the country by any entity, relief agency or autonomous body based on the certificate issued by a state government.
For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in
DVSR Anjaneyulu known as AJ, is a Chartered Accountant by profession. Loves to listening to music & spending time with family and friends.
