Reduction of GST rates for essential Covid products, total exemption of key drugs
The Goods and Services Tax (GST) Council on Saturday slashed the rates for Covid-related drugs, oxygen concentrators and test kits, but kept the vaccine rate unchanged at 5%.
With the exception of three items – electric ovens used in crematoriums, temperature control instruments and ambulances – the Council, at its 44th meeting, accepted all other tax rate recommendations at the same level. than those suggested by a group of ministers (GoM) constituted publish it. The changes would be notified soon, officials said, and will be valid, from now, until September 30.
Divergent views on the extent of the reduction of essential elements of Covid have resurfaced between the states and the Center. Opposition-led states have requested an exemption or zero score for essential elements of Covid which they say were not considered by the Center at the meeting. These state MFs said the GoM’s recommendations were finalized without considering their views.
West Bengal Finance Minister Amit Mitra has suggested a zero score for Covid essentials or a 0.1% GST rate for these items – a suggestion previously made by BJP MP Rajya Sabha Sushil Kumar Modi. Mitra, in a letter to Union Finance Minister Nirmala Sitharaman after the meeting, said her voice was “muzzled” at the meeting and her words “suppressed”.
Punjab Finance Minister Manpreet Singh Badal said it was a “once a century” crisis and the GoM should “stop acting like a Shahenshah”. Although no state pressured to vote, the call for a zero or zero score for essential elements of Covid has become a contentious issue.
Among the decisions made on Saturday, the GST rate for the Covid-related drug Tocilizumab and the formulation for the treatment of the black fungus, Amphotericin B, was reduced to zero by 5% while that of pulse oximeters was reduced. reduced from 12% to 5%.
For hand sanitizers, the tax has been reduced from 18% to 5% and for Covid test kits from 12% to 5%. While vaccination in public facilities will be free and therefore without impact on the GST for the end consumer, it will remain part of the cost of vaccination in private hospitals.
Sitharaman said the council has largely followed GoM’s recommendations. For vaccines, she said the rate was kept at 5% because the Board believed that the majority of vaccine purchases were made by the Center and distributed free to people.
“The central government buys 75 percent and also pays the GST. But the impact of this GST on people will be zero since people will be vaccinated for free in public hospitals. The center buys and it’s given to people for free, ”Sitharaman said.
States and the Center disagreed on the timing of the concessions, with states requesting their extension beyond August, a suggestion from the GoM. For now, the concessions will be valid until September 30.
“The period until August was the recommendation. After discussion in the Council, it was extended until September 30. And on the basis of advice and also contributions from States, the question of whether this period should be extended further will be brought closer to that date. And the GIC (GST Implementation Committee) will likely take the responsibility of getting the opinion, gathering input from political leaders and taking a final call on whether the extension should be continued after September, ”he said. said Sitharaman.
At the previous meeting on May 28, a GoM was put in place to recommend tax breaks on essential COVID products, including PPE kits, masks and vaccines. The GoM, headed by Meghalaya Chief Minister Conrad Sangma, submitted its report on June 7.
Other members included the Deputy Chief Minister of Gujarat, Nitinbhai Patel; Maharashtra’s Deputy Chief Minister Ajit Pawar; Goa Minister of Transport Mauvin Godinho; Kerala Finance Ministers (KN Balagopal); Odisha (Niranjan Pujari); Telangana (T Harish Rao); and Uttar Pradesh (Suresh Khanna).
Congress and other opposition-led states had demanded lower taxes and a zero rate for these items, but the Center felt that this may not result in the benefits being passed on to end users.
Zero valuation of items would require changes in GST laws. The Center has previously said that placing these items in the zero tax category will prevent producers from claiming the input tax credit.
Minister of State for Finance Anurag Thakur refuted Mitra saying it appeared he “didn’t have a stable VC connection”. “The Minister of Finance has never stifled dissent in the GST Council. It is improper for a senior Council official to suggest that this has happened, ”he said.
On the issue of ministers from states ruled by Congress declaring they were excluded from GoM, Sitharaman said: “In Council, the three ministers of Congress said that in the future you should consider our membership in a GoM. . As far as I can say with certainty, selection in a GoM is never done on the basis of a party, nor is exclusion. “
Tax experts said keeping the vaccine tax rate at 5% will ensure that the input tax credit chain is not broken. The concession period is expected to be extended at a later stage due to its importance in building health care infrastructure, they said.
“While the reductions on drugs and equipment are good welfare measures, reducing the exemption period would make it difficult for companies to plan new investments and expand their supply chains in order to s ‘ensure that they reach all corners of the country. Companies engaged in their manufacturing and trading hope that the period will be extended beyond September 30, ”said MS Mani, Senior Director of Deloitte India.