Nirmala Sitharaman: GST cannot be completely removed on Covid vaccine, doing so will result in costly drug

Finance Minister Nirmala Sitharaman said the removal of the Goods and Services Tax (GST) on Covid vaccine, medicines and oxygen concentrators said that with its removal these life-saving medicines and goods would become expensive for buyers. Explaining the reason for this, she said that after the removal of GST, their manufacturers will not get the benefit of input tax credit for the tax paid on raw/intermediate goods and materials used in production.

Currently GST seems too much: Currently, domestic supply and commercial import of vaccines attract GST at the rate of five per cent. At the same time, GST is applicable at 12% on Covid drugs and Oxygen concentrators. West Bengal Chief Minister Mamata Banerjee has also made a similar demand.

Removal of GST will not give benefit of input tax credit

Responding to the demand for exemptions from GST on these goods, Sitharaman said in the tweet, “If a full five percent discount is given on the vaccine, then the input tax credit for the tax paid on the raw material to the vaccine manufacturers won’t benefit. There will be no profit and they will recover the entire cost from customers, citizens. The imposition of GST at the rate of five per cent gives manufacturers the benefit of input tax credit (ITC) and can claim refund if ITC is higher. Therefore, exempting GST from vaccine manufacturers will harm consumers.

Sitharaman said that if there is a receipt of Rs 100 on some goods in the form of Integrated GST (IGACT), half of this amount goes to the account of both Central GST and State GST, besides the Center as Central GST. But 41 percent of the amount received is also given. Thus, out of every 100 rupees, the amount of 70.50 rupees is the share of the states.

Finance Minister’s reply to Mamta Banerjee

Let me tell you that in a letter written to the PM, Banerjee had demanded removal of other taxes like GST and customs duty on some Covid relief materials. Finance Minister Nirmala Sitharaman said on a letter written by West Bengal Chief Minister Mamata Banerjee to Prime Minister Narendra Modi that in a order issued on May 3, a list of Covid-19 relief materials has been relieved from customs duty. Further Sitharaman said that Banerjee should see that the items which are in your list are already included in it.

Banerjee urges the Prime Minister

Mamta Banerjee wrote a letter to Prime Minister Narendra Modi on Sunday requesting him to exempt all taxes and customs duties on equipment and medicines used to fight the Covid-19 epidemic. She said in the letter that, ‘a large number of organizations, people and philanthropic agencies have come forward to donate cylinders, containers and Covid-related medicines. Many donors have turned to the state government to consider exempting them from customs, SGST, CGST, and IGST. Since their prices fall within the purview of the Central Government, I request that these goods be exempted from GST/Customs duties and other similar duties and taxes so that the efficient management of the Covid-19 epidemic will take care of the above life saving drugs and equipment.