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The GST Council’s Fitment Committee, which prepares proposals for rate revisions, is for keeping the rate unchanged on Covid vaccines. It has, however, recommended lowering the duty for a limited period on oxygen concentrators and pulse oximeters, but no change for items such as PPE kits and N-95 masks.
A final call on these suggestions will be taken when the GST Council meets on May 28. These suggestions are not binding on the Council. But West Bengal and Punjab have reiterated their demand for lowering duty on Covid relief materials.
Input Tax credit issue
A source explained to BusinessLine that the vaccines are almost entirely procured by the Centre and provided to States free of cost. “Now, if the vaccines are exempted, this would result in no Input Tax Credit to domestic manufacturers. That is why the Fitment Committee was of the view that the 5 per cent tax rate be continued,” the source said.
On May 9, while responding to the demand of West Bengal Chief Minister Mamata Banerjee, Union Finance Minister Nirmala Sitharaman had said that GST at 5 per cent is in the interest of the domestic vaccine manufacturers and of the citizens. If exempted from GST, vaccine manufacturers would not be able to offset their input taxes and would pass them on to the consumer by increasing the price.
“A 5 per cent GST rate ensures that the manufacturer is able to utilise the Input Tax Credit and in case of overflow of ITC, claim refund. Hence, exempting the vaccines from GST would be counter-productive without benefiting the consumer,” she had said.
Zero rate structure
But in a letter to Sitharaman on Tuesday, Bengal’s Finance Minister, Amit Mitra, called for some extreme measures to bring relief to the people. “I propose that the Council, in its wisdom, may agree to accept zero-rate tax for all Covid relief materials, equipment, drugs and vaccines. This will allow manufacturers and their entire supply chain entrepreneurs to avail input tax credit. Therefore, there would be no adverse impact on prices for the consumers,” he wrote.
Punjab rues Customs duty
In a similar letter, Punjab’s Finance Minister, Manpreet Singh Badal, said that various Covid relief materials suffer a basic Customs duty of up to 20 per cent and GST of up to 18 per cent besides a social welfare surcharge of 10 per cent. As IGST is charged on taxable value that includes import duty, the cost goes up by 2-3 per cent.
“It is baffling that despite the crisis our country currently finds itself in with millions of people suffering the consequences of Covid and inadequate health infrastructure, taxes this high continue to apply on basic essentials needed to overcome this life threatening disease that engulfed the entire world,” he said.
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