GST on vaccines in the 'interest of citizens,' must to keep rates low: FM

If full exemption from GST is given, vaccine makers would not be able to offset their input taxes and would pass them on to the end consumer by increasing the price, says FM

Finance Minister Nirmala Sitharaman on Sunday said that the goods and services tax (GST) on coronavirus-related drugs and vaccines is necessary so that manufacturers offset their input taxes and keep the prices low. 

"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," Sitharaman said.

The Finance Minister was responding to a letter by West Bengal Chief Minister Mamata Banerjee to the Prime Minister Narendra Modi seeking GST exemption on various coronavirus-related drugs.

"A 5 per cent GST rate ensures that the manufacturer is able to utilise 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," she said.

In a series of tweets, Sitharman further said that the union government has already exempted a host of items from GST and customs duty. 

Sitharaman said the vaccines are already being provided free of cost by the Centre to those who are 45 years of age and above and to all frontline workers.

"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," Sitharaman said.

"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."

"Full exemption from Customs duties, including IGST, is already available to all Covid relief material (not confined to a list) imported by for free distribution in the country and also exemption from all duties has been provided to Remdesivir injections, Remdesivir API," she said.