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Thursday, June 24, 2021
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How GST exclusion will make Covid related resources costlier, Explains Sitharaman

The Finance Ministry on Sunday explained how exclusion of Good and Services Tax (GST) from Covid relates products and equipments will make them even more costlier then they are presently for consumers.  

Finance Minister Nirmala Sitharaman said GST exception to homegrown supplies and business import of Covid drugs, vaccines and oxygen concentrators would make these things costlier for consumers as producers would not have the option to balance the charges paid on inputs.

At present, homegrown supplies and business imports of vaccines pull in a 5 percent Goods and Services Tax (GST), while it is 12% on account of Covid related drugs and oxygen concentrators.

In a series of tweeted Ms Sitharama said, “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 the vaccine from GST would be counterproductive without benefiting the consumer.” 

While refering to an example, 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,” said the finance minister. 

Early in the day the West Bengal Chief Minister Mamata Banerjee wrote to the Prime Minister Narendra Modi looking for exception from GST and customs duty any donations of oxygen concentrators, cylinders, cryogenic capacity tanks and Covid drugs from associations or offices.

The Finance Minister tweeted her reaction to the Chief Minister’s letter, saying these things are already expemted from health cess and customs duty. Additionally, Integrated GST (IGST) is likewise exempted on all Covid alleviation material imported by the Indian Red Cross with the expectation of complimentary distribution in the country, she further said.

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