GST rates slashed on essential Covid items

NEW DELHI: 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 and the department of pharmaceuticals 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 be borne by the central government which is paying for all these vaccines).

“These rates will be valid till September as against Augustend [that was] recommended by the GOM,” she said, referring to a June recommendation by a ministerial group. 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 pane, 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 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 sanitiser, temperature check equipment, and gas, electric and other types of furnaces for crematoria, including their installation, have been slashed from 18% to 5%. The immediate revenue impact of these changes is not known.

MS Mani, senior director at Deloitte India, said 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 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”.