GST exemption on vaccines will lead to high prices: FM Sitharaman

Statement follows West Bengal CM Mamata Banerjee's letter to PM seeking GST exemption

Finance Minister Nirmala Sitharaman’s statement in a series of tweets followed West Bengal Chief Minister Mamata Banerjee’s letter to Prime Minister Narendra Modi urging exempting key drugs and vaccines from GST and other duties to help remove supply constraints and contribute towards effective management of the pandemic.
 
Sitharaman said doing away with the 5 per cent GST on vaccines and 12 per cent GST on medicines would deny manufacturers input tax credit (ITC), who would then pass that as the cost to the end consumers or citizens by increasing the price.
 
Demands to exempt Covid-19 vaccines and related medicines from GST are growing as the country is fighting the second wave of the pandemic. Several states, including West Bengal, Chhattisgarh, and Punjab, have pitched for the exemption. Former chief economic adviser to the Centre, Arvind Subramanian, has also pressed for suspension of GST and import duties on all goods and services — domestic and imports — related to Covid-19.
 
“If full exemption from GST is given, the domestic producers of these items would be unable to offset taxes paid on their inputs and input services and would pass these on to the end consumers by increasing their price,” said Sitharaman in a tweet on Wednesday. She said a 5 per cent GST rate ensures that the manufacturer can utilise ITC, and in case of overflow of ITC, claim a refund. Hence, the exemption to the vaccine from GST would be counterproductive without benefiting the consumer.
 
Banerjee pointed out in the letter that a large number of organisations, individuals, and benevolent agencies that have come forward to donate oxygen concentrators, cylinders, containers, and Covid-related drugs have approached the state to consider exemption of these from Customs duty, state goods & services tax, central goods and services tax, and integrated goods and services tax (IGST).
 
Sitharaman said the Centre had already granted exemption from IGST for imports on May 3. “These were given exemption from Customs Duty/health cess even earlier,” she tweeted.
 
The FM said full exemption from Customs duties, including IGST, was already available to all Covid relief material imported by the International Committee of the Red Cross for distribution in the country. “With effect from May 3, full exemption from all duties has been provided to (antiviral drug) remdesivir injections, remdesivir API, and for a chemical for the manufacture of this drug,” the minister tweeted.
 
“Also to medical oxygen, equipment used for the manufacture, storage and transportation of oxygen, equipment used for providing oxygen therapy to Covid patients such as oxygen concentrators, ventilators, non-invasive oxygen masks etc.”
 
Sitharaman said Covid-19 vaccines were being given for free to those who are 45 and above.