GST relief on locally made vaccines won’t help: Centre

 







The government has turned down requests for goods and services tax (GST) relief on domestic production of covid vaccines and drugs, saying it would be counterproductive to consumers. This comes in the wake of the government granting tax relief on imported covid-related medical supplies.

The difficulty in granting GST exemption to locally produced vaccines and covid-related drugs is that the raw material and services used in their production will continue to attract taxes and producers will not be able to use the tax credits for this.

This could force them to recover the tax from the consumer, which could drive up retail prices.

In 2018, the GST Council bowed to public pressure and brought down GST rates on sanitary napkins from 12% to zero despite the tax credit problem

Vaccines attract 5% GST. Vaccine manufacturers won’t be able to offset input taxes and would pass them on to the end consumer by increasing prices, if full exemption from GST is given, Union finance minister Nirmala Sitharaman said in a tweet.

“A 5% GST rate ensures that the (vaccine) manufacturer is able to utilize input tax credit (ITC) and, in case of overflow of ITC, claim refund. Hence, exemption to vaccine from GST would be counterproductive without benefiting the consumer," the minister said in her tweet.

Sitharaman was responding to a letter written by West Bengal chief minister Mamata Banerjee to Prime Minister Narendra Modi asking for tax relief on covid-related medical supplies.

Duty relief has already been granted in the case of imports, the minister pointed out.

A list of items for covid relief had been granted exemption from Integrated GST (IGST), customs duty and health cess, Sitharaman said. Full exemption from customs duties, including IGST, is available to all covid relief material imported by the Indian Red Cross Society for free distribution in the country, the minister said.

Full exemption from all duties has been provided to remdesivir injections, remdesivir raw material, medical oxygen and related gear, equipment used for the manufacture, storage and transportation of oxygen and equipment used for providing oxygen therapy. A 12% GST is applicable on covid drugs and oxygen concentrators on domestic supplies.


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