Nirmala Sitharaman: GST waiver on Covid jabs, drugs will backfire: FM Nirmala Sitharaman

Finance minister Nirmala Sitharaman said exempting vaccines, Covid-related drugs and oxygen concentrators from goods and services tax (GST) would actually raise their prices, as domestic producers of these items would be unable to claim credit for taxes on inputs used.

In a set of 16 tweets on Sunday, she argued why a nominal GST 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 posts, responding to a demand from West Bengal chief minister Mamta Banerjee.

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

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.

Banerjee has sought the exemption of 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 chief minister had written to Prime Minister Narendra Modi about this on Sunday.

Sitharaman said full exemption from all duties had been provided to remdesivir injections, the remdesivir active pharmaceutical ingredient (API), and a chemical used in the manufacture of the drug, with effect from May 3.

Exemption Available for Medical Oxygen

This exemption is also available for medical oxygen, and equipment used for the manufacture, storage and transportation of oxygen. It’s also applicable on equipment used for providing oxygen therapy to Covid patients such as oxygen concentrators, ventilators, non-invasive oxygen masks, inflammatory diagnostic kits, reagents for testing and vaccines among others.

The exemption is also available when items are 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, the government has also provided full exemption from basic customs duty and health cess to their commercial imports,” the minister said.

Full exemption from customs duties, including IGST, is already available to all Covid relief material imported by the Indian Red Cross for free distribution in the country, she added.

Sitharaman argued that much of the integrated GST collected went to the 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.

She added that Covid vaccines were being provided free of cost by the Centre to citizens over 45 years of age and to all frontline workers.