Finance Minister Nirmala Sitharaman on Sunday dismissed the removal of GST on corona vaccine, medicines, and oxygen concentrators. She said that the removal of GST would make these life-saving medicines expensive for buyers.
Reason Why GST Can’t Be Removed
Nirmala Sitharaman explained the reason why GST can’t be removed. She told after removing GST, the manufacturer will not get the benefit of input tax credit for the tax paid on raw and intermediate goods and materials used in production. Currently, GST is levied at the rate of 5 percent on the domestic supply of vaccines and commercial exports. At the same time, GST is applicable at 12 percent on COVID medicines and oxygen concentrators.
Exemption In Tax Will Increase Burden On Public
Sonia Gandhi and Mamata Banerjee have demanded a tax exemption on COVID vaccines and medicines. Responding to the demand for exemption from GST on these goods, Nirmala Sitharaman said, If the total 5% discount is given on the vaccine, then the vaccine manufacturer will not get an input tax credit for the tax paid on the raw material. There will be no profit, and the manufacturer will recover the entire cost from the customers. By applying GST at the rate of 5%, the manufacturer gets the benefit of Input Tax Credit (ITC) and can claim a refund if ITC is more. Therefore, the exemptions from the GST to the vaccine manufacturer will harm the consumers.
In a series of 16 tweets, Nirmala Sitharaman explained why GST couldn’t be removed from COVID vaccines and medicines. Below are the tweets.
2/ 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.
Hon. CM @MamataOfficial , may notice that items in your list are covered. @ANI @PIB_India @PIBKolkata pic.twitter.com/zuDJP1vOB0
— Nirmala Sitharaman (@nsitharaman) May 9, 2021
4/ With effect from 3 May, 2021, full exemption from all duties has been provided to Remdesivir injections, Remdesivir API, and for a chemical for the manufacture of this drug. @ANI @PIB_India @PIBKolkata
— Nirmala Sitharaman (@nsitharaman) May 9, 2021
6/ Also to Inflammatory diagnostic kits and reagents for COVID testing and COVID vaccines.@ANI @PIB_India @PIBKolkata
— Nirmala Sitharaman (@nsitharaman) May 9, 2021
8/ In order to augment the availability of these items, Government has also provided full exemption from basic customs duty and health cess to their commercial imports.@ANI @PIB_India @PIBKolkata
— Nirmala Sitharaman (@nsitharaman) May 9, 2021
10/ If IGST ₹100 is collected on an item, ₹50 accrues to the Centre and the States each as CGST and SGST respectively. Further 41% of the CGST revenue is devolved to States.
So out of a collection of ₹100, as much as ₹70.50 is the States’ share.
— Nirmala Sitharaman (@nsitharaman) May 9, 2021
12/ COVID vaccines are being provided free of cost by the GoI to those who are 45 yrs of age & above and to all frontline workers.
On Government supplies, GST is also paid by the Government. @ANI @PIB_India @PIBKolkata
— Nirmala Sitharaman (@nsitharaman) May 9, 2021
14/ 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.@ANI @PIB_India @PIBKolkata— Nirmala Sitharaman (@nsitharaman) May 9, 2021
16/ A 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.@ANI @PIB_India @PIBKolkata— Nirmala Sitharaman (@nsitharaman) May 9, 2021
Currently, India is fighting with the second wave of coronavirus. Every day the cases are increasing. Always wear masks, maintain social distancing and keep sanitizer. The vaccination has started for above 18, register yourself and get the vaccination done.
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