GST panel rejects demand for tax waiver on COVID-19 vax, ventilator

The goods and services tax (GST) fitment panel, comprising officers from the Centre and some states, has recommended a short-term rate cut on four Covid-19 related items, according to the detailed agenda note for the upcoming Council meeting. The lowest GST slab of 5 per cent has been proposed for oxygen concentrators, medical grade oxygen, pulse oximeters and testing kits, down from 12 per cent currently.

However, the committee, which recommends rate changes to the GST Council, has rejected the popular demand for exemption or rate reduction on Covid-19 medicines, vaccines, ventilators, temperature equipment, RT PCR machines, ambulances, etc. on feasibility grounds.

The proposal by the rate panel will be placed before the GST Council on Friday. The 43rd Council meeting, to be held through video-conferencing, will be held after a gap of seven months.

State finance ministers are expected to strongly pitch for GST exemption on Covid-19 related medical supplies including medicines and equipment as the country battles an intense second pandemic wave.

The fitment committee has recommended a GST rate cut on medical oxygen, oxygen concentrators and oximeters to 5 per cent from 12 per cent till July 31. It noted that full GST exemption will not be feasible as domestic manufacturers would not be able to claim input tax credit on taxes paid on the input goods and services, the Council agenda note reviewed by Business Standard showed. In case of Covid-19 testing kits, the fitment committee has proposed a GST reduction to 5 per cent from 12 per cent till August 31.

The committee rejected a rate cut for ventilators, which currently attract 12 per cent GST, arguing that it is not procured by individuals and is not as critical or in short supply as oxygen concentrators. As for Covid-19 related drugs and medicines, the fitment panel pointed out that most drugs being used in Covid-19 management are already available at a concessional rate of 12 or 5 per cent. “Further, the Covid-19 treatment protocol was also undergoing changes based on new learnings and studies on efficacy of drugs and medicines being used. That being so, the committee, while in principle arriving at a view that the GST rate on such Covid-19 related drugs and medicines should be lower, it may not be feasible to identify any particular drug that is meant for Covid cure,” it pointed out. It cited the example of Remdesivir, which has been removed by the World Health Organisation from official medical list. “If, the Ministry of Health and Family Welfare later recommends any medicine specifically, the same may be examined for GST concession,” it said.

As for Covid-19 vaccines, the committee pointed out those were already in the lowest GST rate slab of 5 per cent and were largely being procured by the Centre and state governments, which were providing the vaccine free of cost. “GST paid would ultimately accrue to the Centre and the states itself,” it said. Besides, granting complete exemption would result in increased cost of production because the domestic manufacturers of Covid-19 vaccines would not be able to take input tax credit (ITC) on tax paid on their input goods and services,” it added.

The Council will also take a call on levy of 12 per cent GST tax on import of oxygen concentrators for personal use, following the Delhi High Court directive last week. The court had termed the levy ‘unconstitutional,’ pointing out that oxygen concentrators were a life-saving device during the pandemic.

After the GST Council agenda was circulated, West Bengal and Punjab state finance ministers, in a letter to Union Finance Minister Nirmala Sitharman, reiterated their demands for GST exemption on Covid-19 medical supplies. West Bengal FM Amit Mitra recommended a zero-rated tax for all Covid-19 related material, equipment, drugs and vaccines. “This will allow the manufacturers and their entire supply chain entrepreneurs to avail input tax credit. Therefore, there will be no adverse impact on prices for the consumers,” Mitra said in the letter.

The fitment panel has however argued in its recommendation that zero rating of items for domestic consumption is not permissible in law.

Meanwhile, Punjab FM Manpreet Singh Badal also recommended ‘’urgent measures’’ to provide GST relief on Covid-19 supplies including medicines like Remdesivir, ventilators, oxygen concentrators, etc. Business Standard