Several states, including West Bengal and Punjab, proposed the GST waiver.(File photo)
Several states, including West Bengal and Punjab, proposed the GST waiver.(File photo)

Centre may waive GST on items essential for Covid-19

As several states have asked to exempt all Covid-essential materials, equipment, medicines and vaccines from GST, the ‘end use-based exemption’ proposal could be placed before the GST Council, which is the competent authority to decided this matter, they said requesting anonymity.
By Rajeev Jayaswal, New Delhi
UPDATED ON MAY 26, 2021 05:02 AM IST

The government may exempt Goods and Services Tax (GST) on essential drugs and other materials used for Covid-19 treatment across their entire value chain on the basis of an end-use certification, which is necessary to check tax evasion through diversion of zero-duty inputs to other industries, two people with direct knowledge of the matter said.

As several states have asked to exempt all Covid-essential materials, equipment, medicines and vaccines from GST, the ‘end use-based exemption’ proposal could be placed before the GST Council, which is the competent authority to decided this matter, they said requesting anonymity. The council, an apex federal body on the indirect tax matter, is meeting virtually on Friday after a gap of over seven months.

“An end-use certification will be a must to ascertain that tax-free inputs procured to manufacture Covid-essential drugs, vaccines or equipment are actually used for that purpose,” one person said.

Several states, including West Bengal and Punjab, proposed the GST waiver. West Bengal finance minister Amit Mitra on Tuesday reiterated Chief Minister Mamata Banerjee’s demand for removing GST on medicines and equipments essential for the treatment of Covid-19 patients. “I propose that the Council in its wisdom, may agree to accept zero rated tax for all Covid relevant materials, equipments, drugs and vaccines. This will allow the manufacturers and their entire supply chain entrepreneurs to avail input tax credit. Therefore, there would be no adverse impact on prices for consumers,” Mitra on Tuesday wrote to Union finance minister Nirmala Sitharaman. HT reviewed the letter.

The Union finance ministry did not respond to an email query on this matter.

Reacting to the issue Sitharaman on May 9 said GST exemption on the end product alone would distort the input tax credit system across the value chain, and eventually cost more for the consumer. “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,” she said in a tweet that day.

While vaccines attract 5% GST, a 12% GST is levied on Covid-related drugs and oxygen concentrators.

PTI reported on Tuesday that Punjab finance minister Manpreeet Singh Badal has also demanded a cut in tax rate on life-saving items. HT reported on April 29 that the government might waive off GST on Covid-19 vaccines to reduce their costs.

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