GST waiver will make vaccines costlier, says FM

Finance minister Nirmala Sitharaman on Sunday virtually ruled out exempting vaccines, medicines and oxygen concentrators from GST, saying such an exemption will make the life-saving items costlier for consumers as manufacturers will not be able to offset the taxes paid on inputs.

Currently, domestic supplies and commercial imports of vaccines attract a 5% goods and services tax (GST), while Covid drugs and oxygen concentrators attract a 12% levy.

Congress working president Sonia Gandhi had last month demanded that all life-saving drugs, equipment and instruments required to treat Covid-19 patients must be exempted from GST. West Bengal Chief Minister Mamata Banerjee has also made a similar demand.

“If full exemption from GST is given, vaccine manufacturers would not be able to offset their input taxes and would pass them on to the end consumer/citizen by increasing the price,” Sitharaman said in a series of tweets.

“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 the vaccine from GST would be counterproductive without benefiting the consumer.” The tweets, 16 of them in all, were in response to Banerjee’s letter to Prime Minister Narendra Modi.

Sitharaman said the Centre and states equally split collections made from levy of Integrated GST (IGST).

Further 41% of the Central GST revenue is devolved to States. So out of a collection of ₹100, as much as ₹70.50 is the share of states.