GST Council cuts rates on key Covid items till September 30

“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.

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.

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.