Finance Minister Nirmala Sithraman defended the government's decision to tax COVID-related drugs and equipment. The minister was responding to West Bengal Chief Minister Mamata Banerjee's letter to Prime Minister Narendra Modi seeking GST exemption on COVID-19 vaccines and supplies.
In response to Banerjee's letter, on May 9, the minister said that an exemption on domestic supplies and commercial imports would make these items costlier for consumers, reported The Indian Express. The minister responded in a series of tweets and said the government has already reduced taxes on a number of items.
The minister reasoned that doing away with the 5 percent GST on supplies and commercial import of vaccines and 12 percent GST on COVID medicines and oxygen concentrators would deny manufacturers input tax credit (ITC), a mechanism to offset their taxes on inputs used, who would eventually pass that as the cost to the end consumers or citizens and thereby increasing the price.
"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% GST rate ensures that the manufacturer is able to utilise ITC (input tax credit) and in case of overflow of ITC, claim refund. Hence exemption to vaccine from GST would be counterproductive without benefiting the consumer," Sitharaman tweeted.
There has been a growing demand to exempt COVID vaccines and related medicines from GST as the country is currently fighting a deadly second wave.
States like West Bengal, Chhattisgarh, and Punjab have pitched for such an exemption. Former Chief Economic Adviser, Arvind Subramaniam, had also pressed for suspension of GST and import duties on all goods and services, reported Business Standard.
Sitharaman also pointed out that full exemption from customs duties, including GST, is already available to all COVID relief material imported by the International Committee of the Red Cross for distribution in the country.
She also highlighted the free vaccination programme being conducted by the Centre for those above 45. The demand for exemption on COVID vaccine comes in the backdrop of the vaccine cost in India being the highest in the world.