GST exemption on domestic products, commercial imports of COVID drugs to raise prices: Sitharaman

Finance Minister Nirmala Sitharaman has practically ruled out sparing Covid vaccines, medications, and oxygen concentrators from GST, claiming that doing so would increase the cost of lifesaving items for consumers because manufacturers would be unable to offset the taxes paid on inputs.

Domestic supplies and commercial imports of vaccines are subject to a 5% Goods and Services Tax (GST), while COVID drugs and oxygen concentrators are subject to a 12% levy.

Last month, Congress working president Sonia Gandhi asserted that all life-saving drugs, equipment, and tools used to treat Covid-19 patients be exempt from GST. Mamata Banerjee, the Chief Minister of West Bengal, has made a similar demand. GST exemption on domestic products, commercial imports of COVID drugs to raise prices: Sitharaman

“If full GST exemption is granted, vaccine manufacturers will be unable to offset their input taxes and will pass them on to the end consumer/citizen by raising the price,” Sitharaman announced in a string of tweets. “A 5% GST rate guarantees that the manufacturer can use ITC and claim a refund if there is an overflow of ITC. As a result, exempting the vaccine from GST would be counterproductive and would not benefit the consumer.”

With over 4 lakh new COVID-19 cases reported daily over the weekend, India is experiencing the world’s worst COVID-19 outbreak. More than 2.42 lakh people in India have died as a result of the virus.

The public health system is crumbling under the burden of rising infections and deaths, with several parts of the country reporting a lack of hospital beds, medical oxygen, medications, and vaccines.

To bolster her point about the levy of GST on imported goods, Sitharaman stated that the Centre and states split the proceeds from the Integrated GST (IGST) levy equally.

Furthermore, 41% of the Central GST revenue is devolved to the states. So, out of a collection of Rs 100, the states and UTs may receive as much as Rs 70.50.

The Centre receives half of the GST collected on vaccines, while the States receive the other half. Furthermore, 41% of the Centre’s collections are devolved to the states. As a result, states receive nearly 70% of the total revenue generated by vaccines.
Mamata Banerjee wrote to Modi earlier that day, demanding that any donations of oxygen concentrators, cylinders, cryogenic storage tanks, and COVID-related drugs from organisations be exempt from GST and customs duty.

“To increase the availability of these items, the government has also exempted their commercial imports from basic customs duty and health cess,” Sitharaman said.

With effect from May 3, the government exempted IGST on the import of COVID-relief material received as a donation for free distribution in the country, which aided in the speeding up of such substances’ customs clearances. This exemption would be conditional on nodal authorities appointed by state governments authorising any entity, relief agency, or statutory body to distribute such relief material freely. The goods as mentioned above can be imported for free by a state government or any entity/relief agency/statutory body authorised in this regard for distribution throughout India.


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