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GST Council cuts rates on key Covid items till September 30

A top official told Moneycontrol that after the Group of Ministers submitted its recommendations, the central government also took the views of vaccine manufacturers and companies which make key COVID-related items.

June 12, 2021 / 06:28 PM IST
Finance Minister Nirmala Sitharaman chaired the GST Council meet on June 12 (Illustration: Moneycontrol)

Finance Minister Nirmala Sitharaman chaired the GST Council meet on June 12 (Illustration: Moneycontrol)

The all-powerful Goods and Service Tax Council, in its meeting on June 12, slashed the GST rates on a number of items crucial in the fight against COVID-19 pandemic. These include essential medicines, oxygen, oxygen generation equipment and related devices, and diagnostic and testing machine kits.

The items on which rate cuts were made include Remdesivir, Tocilizumab, medical grade oxygen, oxygen generator, ventilators, masks, COVID testing kits, oximeters, hand sanitisers, cremation furnaces, ambulances, temperature checking devices and others. These cuts are applicable till September 30.

A top government official told Moneycontrol after the meeting that while the Council understood there will be revenue foregone as a result of the cuts, that was not a priority for the participants.

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“All the central and state ministers in the Council understood that the priority is to provide relief to citizens while also ensuring that manufacturers don’t face issues related to income tax credit. Hence rates were cut on most items instead of exempting them outright,” the official said.

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COVID-19 Vaccine

Frequently Asked Questions

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A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

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Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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The person added that the only items in which rates were made zero were the drugs Tocilizumab and Amphotericin B, which are imported and not produced in India.

GST Chart 1206_001

The rate cuts are applicable for domestically manufactured as well as imported items.

These cuts were recommended by the Group of Ministers (GoM), which was formed after the last GST Council meeting on May 28 to deliberate on possible reductions in COVID-related items.

In a media briefing after the latest GST Council meeting, Finance Minister Nirmala Sitharaman said that the recommendations of the GoM had been accepted.

“The GoM’s recommendations have been accepted. They had suggested that these cuts be applicable till August 31. After discussions, it has been decided that these rates will be applicable till September,” Sitharaman said.

“While the reductions on medication and equipment are good welfare measures, curtailment of the exemption period would make it difficult for businesses to plan new investments and expand their supply chains in order to ensure that they reach all corners of the country. Businesses engaged in their manufacture and trading would hope that the period is extended beyond September 30," said MS Mani, senior director at Deloitte India.

The GoM includes Meghalaya Chief Minister Conrad Sangma, Gujarat Deputy Chief Minister Nitin Patel, Maharashtra Deputy Chief Minister Ajit Pawar, Goa Transport Minister Mauvin Godinho, Kerala Finance Minister KN Balagopal, Odisha Finance Minister Niranjan Pujari, Telangana Finance Minister T Harish Rao, and Uttar Pradesh Finance Minister Suresh Khanna.

Rates on vaccines unchanged

The GoM had not recommended any cut in rates of Covid-19 vaccines like Covishield and Covaxin. The rates on these unchanged.

The official quoted above told Moneycontrol that after the GoM submitted its recommendations on June 8, the central government also took the views of vaccine manufacturers and companies which make various key COVID-related items.

“None of the private sector makers or other stakeholders we spoke to suggested exemption,” the person said.

"The rate cut has not been done with an eye on cost implications. It has been done so that people are benefitted. The GST council did not approach the issue with costs in mind and the ultimate focus was on how consumers can be benefitted," Revenue Secretary Tarun Bajaj said at the media briefing.

"The 5 percent rate on vaccines will remain. It was earlier decided that the Centre will also pay the GST for the 75 percent of vaccines it is procuring. But of the income generated from the GST, 70 percent will be shared with states as per the existing devolution formula plus the amount due to states as SGST," Bajaj said.

“The changes in GST rates on COVID items will be much appreciated by the general public as this is expected to reduce the cost of such critical Covid items for the end user. On the topic of rate cut for COVID vaccines, the Council decided that since major vaccination is done by the government itself on FOC basis, any change in GST rate was not required,” said Abhishek Jain, Tax Partner, EY.
Arup Roychoudhury
first published: Jun 12, 2021 03:28 pm

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