Giving full GST exemption on vaccines and other covid material will not benefit consumer: Says Finance Minister

The said tweet of Nirmala Sitharaman came in response to letter of Mamta Banerjee seeking full GST exemption on covid vaccines and other material. Some of the important key comments by Sitharaman are as below.

GST at rates varying from 5% (on vaccines), 12% (COVID drugs, oxygen concentrators) is applicable to domestic supplies and commercial import of these items.

If full exemption from GST were 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.

5% GST rate ensures that the manufacturer is able to utilise ITC and in case of overflow of ITC, claim refund. Hence exemption to vaccine from GST would be counterproductive without benefiting the consumer.

Also, from the GST collected, half is earned by the Centre and the other half by the States. Further, 41% of Centre’s collections also get devolved to the States. So States end up receiving almost 70% of the total revenue collected from vaccines. In fact, a nominal 5% GST is in the interest of the domestic manufacturer of vaccine and in the interest of the citizens.

A list of items for COVID relief granted exemption from IGST for imports was issued on 3rd May’21. These were given exemption from Customs Duty/health cess even earlier.

(Copy of Mamta Banerjee Letter)

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