Finance Minister Nirmala Sitharaman has defended the government’s decision to tax Covid-19 related drugs and equipment. This, after West Bengal Chief Minister Mamata Banerjee wrote to the Prime Minister seeking tax exemption on a host of medicines and equipment being used in the treatment of the virus.
“…I would request that these items may be exempted from GST/customs duty and other such duties and taxes, to help remove supply constraints of the above mentioned life saving drugs and equipment and contribute towards effective management of Covid pandemic,” Banerjee wrote. Items listed out by her included oxygen cylinders, concentrators, Covid-19 drugs, among others.
Sitharaman responded on her twitter account, saying that the government has already reduced taxes on a number of items.
“With effect from May 3, 2021, full exemption from all duties has been provided to Remdesivir injections, Remdesivir API, and for a chemical for the manufacture of this drug,” Sitharaman said. “Also to Medical Oxygen, equipment used for the manufacture, storage and transportation of oxygen, equipment used for providing oxygen therapy to Covid patients such as Oxygen Concentrators, Ventilators, Non-invasive oxygen masks etc.”
Sitharaman went on to argue that part of the revenue collected via GST goes to the states.
“GST at rates varying from 5% (on vaccines), 12% (Covid drugs, oxygen concentrators) is applicable to domestic supplies and commercial import of these items,” she said. “If Integrated GST of Rs 100 is collected on an item, Rs 50 accrues to the Centre and the States each as Central GST and State GST respectively. Further 41% of the CGST revenue is devolved to States. So out of a collection of Rs 100, as much as Rs 70.50 is the States’ share.”
Further, Sitharaman argued that if full exemption from GST were given, domestic producers would not be able to claim input tax credit.
“If full exemption from GST were given, the domestic producers of these items would be unable to offset taxes paid on their inputs and input services and would pass these on to the end consumers by increasing their price,” she said.