The group of ministers (GoM) set up to decide GST relief on Covid essentials — including PPE kits, masks and vaccines — is said to have recommended a reduction in rates to a flat 5 per cent on all Covid-related items and sticking with the existing duty of 5 per cent on vaccines.
The GST Council at its meeting on May 28 was divided over the contentious issue of fixing a zero tax on all Covid products.
Sources said the council was likely to meet before the Centre starts procuring vaccines for distribution to the states. The new vaccine policy would be implemented from June 21. A group of ministers led by Meghalaya chief minister Conrad Sangma in its report is learnt to have recommended temporarily slashing the rate to a flat 5 per cent on medicines, medical grade oxygen and pulse oximeters.
The same 5-per-cent rate will also be applied on test kits, hand sanitisers, oxygen therapy equipment, ventilators and other supplies, the ministerial panel said. The rates range from 5 per cent to 18 per cent
The GST on vaccines is expected to stay at 5 per cent.
Sources said the recommendations of the GoM were unlikely to be opposed by the Opposition states at the next council meeting as they themselves were in favour of a uniform 5 per cent rate on all Covid items. Besides, as the states would not be involved in vaccine purchases, they should not oppose the 5 per cent levy on the vaccines.
Finance minister Nirmala Sitharaman was against slashing of the rates on vaccines as the domestic producers would be unable to offset taxes paid on their inputs and pass these on to the consumers by increasing the prices.
In a series of tweets she had said “a 5 per cent GST rate ensures that the manufacturer is able to utilise ITC and in case of overflow of ITC, claim refund. Hence, exemption to vaccines from GST would be counterproductive without benefiting the consumer”.
Bengal finance minister Amit Mitra had written to Sitharaman proposing zero-rated tax on Covid items at least for a fixed period of time or taxing them minimally at 0.1 per cent to avoid any hurdles at the implementation stage.
