GST rates slashed on essential Covid items
The Goods and Services Tax (GST) Council on Saturday temporarily removed GST on two medicines, slashed tax rates on 15 other items such as drugs, medical grade oxygen and testing kits to 5%, and reduced the levy on ambulances to 12% for a little over three-and-a-half months to help individuals and governments fight Covid-19 and its fallout.
While GST on Amphotericin B (used to combat mucor) and Tocilizumab has been slashed from 5% to zero, tax on remdesivir and anti-coagulant Heparin has been reduced from 12% to 5%. A flat GST rate of 5% has been retained on all drugs recommended by the ministry of health and family welfare (MoHFW) and the department of pharmaceuticals (DoP) for Covid treatment.
After the 44th meeting of the council, its chairperson and Union finance minister Nirmala Sitharaman said the levy of 5% GST on Covid-19 vaccines will continue as 75% vaccines are available to people free of cost in government hospitals (the tax burden will borne by the central government which is paying for all these vaccines).
“These rates will be valid till September as against August-end [that was] recommended by the GoM,” she said, referring to a June recommendation by a ministerial group to the effect. According to the minister, the GST Council will review the situation later and take a decision on extending the exemption period further. The GST Council is chaired by Sitharaman and finance ministers of states are its members.
The 43rd meeting of the council on May 28 decided to form a group of ministers (GoM) to consider tax waivers on individual Covid-19 essentials such as vaccines, testing kits, drugs, medical oxygen, oxygen concentrators, ventilators, alcohol-based sanitizers and hand wash. A day later, Sitharaman constituted an eight-member ministerial panel under the convenership of Meghalaya chief minister Conrad K Sangma, which submitted its recommendations to the council on June 6.
In order to bring down costs on oxygen, oxygen generation equipment and related medical devices, the council reduced GST on medical grade oxygen, oxygen concentrator, oxygen generator (including personal imports), ventilator, ventilator mask, canula and helmet, BiPAP machine and high flow nasal canula (HFNC) devices from 12% to 5%.
The GST rates on Covid testing kits and specified inflammatory diagnostic kits, D-Dimer, IL-6, Ferritin and LDH , have also been brought down from 12% to 5%.
Other Covid-related equipment have been also made cheaper. While GST on pulse oximeters (including for personal imports) has been reduced from 12% to 5%, taxes on hand sanitizer, temperature check equipment, and gas, electric and other types of furnaces for crematoria, including their installation, have been slashed from 18% to 5%. Relief has also been given on the purchase of ambulances by reducing GST on them from 28% to 12%.
The immediate revenue impact of these changes is not known.
MS Mani, senior director at Deloitte India, said that the shorter duration of exemptions will make it difficult for businesses to plan new investments and expand supply chains. “Businesses engaged in their manufacture and trading will hope that the period is extended beyond 30th September,” he said.
Abhishek Jain, tax partner at consultancy firm EY, said that the council’s decision to bring down the GST rates on key Covid relief items would “reduce the cost of such critical Covid items for the end users”.
The GoM was constituted after several states demanded a GST waiver on Covid essentials. Other members of the GoM were Gujarat deputy chief minister Nitinbhai Patel, Maharashtra deputy chief minister Ajit Pawar, Goa transport minister Mauvin Godinho, Kerala finance minister KN Balagopal, Odisha finance minister Niranjan Pujari, Telangana finance minister T Harish Rao and UP finance minister Suresh Kr Khanna.
On Saturday, some states demanded a complete waiver on taxes.
“This is totally an anti-people decision that is being thrust on us at the GST Council. As representatives of the people, we have no way to justify these decisions of draconian nature,” said West Bengal finance minister Amit Mitra, expressing his dissent in a letter to Sitharaman. He added that his voice was muzzled at the council meeting on Saturday. Union minister of state for finance Anurag Thakur denied the allegation that Mitra was not allowed to speak during the council meeting, and wrote in a series of tweets that such accusations were “unbecoming” of a senior leader.
Uttar Pradesh deputy chief minister Dinesh Sharma. however, welcomed the move. “The government had been taking all possible major and minor step towards fighting Covid from time to time... Cutting GST on Covid related items and services is a major step towards fighting the pandemic and providing people a relief in it,” he said.