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GST rates cut for Covid essentials, full waiver for key medicines

Among the decisions taken Saturday, the GST rate for Covid-related medicine Tocilizumab and the formulation for black fungus treatment, Amphotericin B, was reduced to nil from 5% while that for pulse oximeters was reduced from 12% to 5%.

Written by Aanchal Magazine | New Delhi |
Updated: June 13, 2021 7:01:36 am
coronavirus, coronavirus andhra pradesh, coronavirus testing andhra pradesh, covid-19 symptomsFor hand sanitisers, the tax was brought down from 18% to 5% and for Covid-testing kits from 12% to 5%. (Express Photo/Representational)

The Goods and Services Tax (GST) Council Saturday cut rates on Covid-related medicines, oxygen concentrators and testing kits, but kept the rate for vaccines unchanged at 5%.

Except for three items — electric furnaces used in crematoriums, temperature-checking instruments and ambulances — the Council, at its 44th meeting, accepted all other recommendations for tax rates at the same level as suggested by a Group of Ministers (GoM) constituted on the issue. The changes would be notified soon, officials said, and will be valid, as of now, until September 30.

Differing views over the extent of reduction on Covid essentials resurfaced between the states and the Centre. Opposition-ruled states asked for exemption or zero rating for Covid essentials which they said was not considered by the Centre in the meeting. These state FMs said the recommendations of the GoM were finalised without taking their views into consideration.

West Bengal’s Finance Minister Amit Mitra suggested zero rating for Covid essentials or 0.1 per cent GST rate for such items — a suggestion earlier made by BJP’s Rajya Sabha MP Sushil Kumar Modi. Mitra, in a letter to Union Finance Minister Nirmala Sitharaman after the meeting, said his voice was “muzzled” in the meeting and his remarks “deleted”.

Punjab Finance Minister Manpreet Singh Badal said it’s a “once in a century” crisis and the GoM should “stop acting like a Shahenshah”. Though no state pressed for voting, the call for zero or zero rating for Covid essentials became a contentious issue.

Among the decisions taken Saturday, the GST rate for Covid-related medicine Tocilizumab and the formulation for black fungus treatment, Amphotericin B, was reduced to nil from 5% while that for pulse oximeters was reduced from 12% to 5%.

For hand sanitisers, the tax was brought down from 18% to 5% and for Covid-testing kits from 12% to 5%. While vaccination at government facilities will be free of cost and, hence, without a GST impact for the end consumer, it will remain part of the cost for vaccination at private hospitals.

Sitharaman said the Council went largely with the GoM’s recommendations. For vaccines, she said the rate was retained at 5% as the Council felt that the majority of the vaccine procurement was being done by the Centre and given free to people.

“The Central Government is purchasing 75 per cent and is paying GST also. But the impact of this GST on people will be nil since people would be getting vaccines free of cost at government hospitals. Centre is purchasing and it is given free to people,” Sitharaman said.

The states and the Centre differed over the timeline for the concessions, with states asking for it to be extended beyond August, a suggestion by the GoM. For now, the concessions will be valid till September 30.

“The period up to August was the recommendation. After discussion in the Council, it has been extended to September 30. And based on the advice and also from states’ inputs, whether that period is to be further extended will be taken nearer that time. And the GIC (GST implementation committee) will probably take the responsibility of eliciting the opinion, taking the political leadership’s inputs and taking a final call on whether the extension should be furthered after September,” Sitharaman said.

In the previous meeting on May 28, a GoM was set up to recommend tax relief on COVID essentials, including PPE kits, masks and vaccines. The GoM, headed by Meghalaya Chief Minister Conrad Sangma, submitted its report on June 7.

Other members included Gujarat Deputy Chief Minister Nitinbhai Patel; Maharashtra Deputy Chief Minister Ajit Pawar; Goa Transport Minister Mauvin Godinho; Finance Ministers of Kerala (K N Balagopal); Odisha (Niranjan Pujari); Telangana (T Harish Rao); and Uttar Pradesh (Suresh Khanna).

The Congress and other Opposition-ruled states had demanded a reduction in taxes and zero rating for these items but the Centre felt that may not result in benefits being passed on to end-users.

Zero rating of items would require amendments in GST-related laws. The Centre has earlier stated that placing such items in the zero tax category will lead to producers not being able to claim input tax credit.

Minister of State for Finance Anurag Thakur rebutted Mitra saying it seemed he “did not have a stable VC connection.” “The Finance Minister has never stifled dissent in the GST Council. It is unbecoming of a senior member of the Council to suggest that this has happened,” he claimed.

On the question of ministers from Congress-governed states stating that they were excluded from the GoM, Sitharaman said, “In the Council, the three Congress ministers said that in the future you should consider us having in a GoM. As much as I can say with confidence, the selection into a GoM is never made on party basis, neither is the exclusion.”

Tax experts said retaining the tax rate for vaccines at 5 per cent will ensure the chain for input tax credit is not broken. The concession period should be later extended for its importance in building healthcare infrastructure, they said.

“While the reductions on medication and equipment are good welfare measures, curtailment of the exemption period would make it difficult for businesses to plan new investments and expand their supply chains in order to ensure that they reach all corners of the country. Businesses engaged in their manufacture and trading would hope that the period is extended beyond September 30,” said M S Mani, Senior Director, Deloitte India said.

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