GST exemption on COVID drugs to make them costlier: FM Sitharaman

New Delhi, May 9

Finance Minister Nirmala Sitharaman on Sunday said GST exemption to domestic supplies and commercial import of COVID 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.

Currently, domestic supplies and commercial imports of vaccines attract a 5 per cent Goods and Services Tax (GST), while it is 12 per cent in case of COVID drugs and oxygen concentrators.

“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 ITC and in case of  overflow of ITC, claim refund. Hence exemption to vaccine from GST would be counterproductive without benefiting the consumer,” Sitharaman tweeted.

She further said if Integrated GST (IGST) Rs 100 is collected on an item, Rs 50 accrues to the Centre and the States each as Central GST and State GST, respectively. Further 41 per cent of the CGST revenue is devolved to States. So out of a collection of Rs 100, as much as Rs 70.50 is the share of the states.

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 devolved to the States. So states end up receiving almost 70 per cent of the total revenue collected from vaccines.

“In fact, a nominal 5 per cent GST is in the interest of the domestic manufacturer of vaccine and in the interest of the citizens,” Sitharaman said.

West Bengal Chief Minister Mamata Banerjee earlier in the day wrote to Prime Minister Narendra Modi seeking exemption from GST and customs duty any donations of oxygen concentrators, cylinders, cryogenic storage tanks and COVID related drugs from  organisations or agencies.

The Finance Minister tweeted her response to the Chief Minister’s letter, saying these items are already exempted from customs duty and health cess. Besides, Integrated GST (IGST) is also exempted on all COVID relief material imported by the Indian Red Cross for free distribution in the country.

Also IGST exemption has been given in case of 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.

“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,” Sitharaman said.

The government has already exempted 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.

Besides, effective May 3, the government exempted IGST on import of COVID-relief material received as donation for free distribution in the country, a move 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 distribution of such relief material.

The said goods can be imported free of cost by a state government or, any entity/ relief agency/ statutory body, authorized in this regard for free distribution anywhere in India. PTI

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