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GST rates on COVID-19-related items slashed until September 30

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The Goods and Service Tax (GST) Council decided to temporarily lower rates on Covid-related items including medicines, oxygen concentrators, testing kits and hand sanitisers to 5% until September 30. It left the rate on vaccines unchanged at 5%.

The council had set up a group of ministers at its last meeting to look into taxation on Covid relief material. The GoM had recommended tax cut on various items. Accordingly, the levy on oxygen generators, pulse oximeters, ventilators as well as the items cited above has been lowered to 5% from 12% or 18%. Also included in this list are remdesivir and other drugs recommended by the health ministry.

“The GST Council has largely agreed to go with the recommendations (of the GoM) except for some slight tweaking. In no case have the rates been increased,” Union finance minister Nirmala Sitharaman said after the council’s meeting on Saturday. The GoM had suggested that the lowered rates prevail until August end, but the council pushed it to September 30, she added. The GST Implementation Committee will look at further extending the end date based on advice and state inputs.

Sharp cuts

GST on ambulances has been lowered to 12% from 28%, that on electric furnaces used in crematoriums to 5% from 18% and temperature checking equipment to 5% from 12%. The rate cut in these three categories has been sharper than what the GoM recommended.

The FM said the council felt that the cuts were required given the impact of the second Covid wave.

Tocilizumab and Amphotericin B have been exempted from GST. Imports of Amphotericin B, used in the treatment of black fungus, had been exempted from integrated GST by the council on May 28.

To be effective in a day or two

Revenue secretary Tarun Bajaj said that the rate cuts and exemptions will be implemented in a day or two.

Experts said the rate cuts will benefit the end user but the limited period could pose problems for businesses that may be planning new investments or expansion. “This change 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,” said Abhishek Jain, tax partner at EY.

Deloitte India senior director MS Mani said, “Businesses engaged in manufacturing (medication and equipment) and trading would hope that the period is extended beyond September 30.”

Vaccine GST

Opposition-ruled states had asked the Centre to consider levying zero-rate GST on vaccines at last month’s meeting, after which the GoM had been constituted. “Some states raised the issue that critical items and vaccines should be zero rated but the council has decided to keep the vaccine rate unchanged,” said a senior official aware of discussions.

The GoM had referred the matter back to the council, while suggesting rate cuts for other categories of Covid-related materials.

The finance minister said people will not be paying any tax on vaccinations under the procurement plan announced by the government since they are being procured by the Centre and will be provided free to all states for inoculation. With the Centre paying GST on them, about Rs 71 of every Rs 100 will be paid to the states, she said.

Sitharaman had said last month that exemption from GST would create problems for domestic producers of vaccines as they would not be able to offset taxes paid on inputs and would pass these on to consumers by increasing prices. A 5% GST rate ensures that they can utilise input tax credit (ITC), she had said.


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