Nirmala Sitharaman replies to Mamata Banerjee, explains tax on vaccines

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Union Finance Minister Nirmala Sitharaman.

Union Finance Minister Nirmala Sitharaman on Sunday in a series of tweets responded to West Bengal Chief Minister Mamata Banerjee after the latter wrote to the Centre seeking exemption from GST/customs and other duties, taxes on some items including Covid related drugs.

“A list of items for COVID relief granted exemption from IGST for imports was issued on May 3, 2021. These were given exemption from Customs Duty/health cess even earlier. Mamata Banerjee may notice that items in your list are covered,” Nirmala Sitharaman tweeted.

“Full exemption from customs duties, including IGST, is already available to ALL COVID relief material (not confined to a list) imported by  @IndianRedCross for free distribution in the country. With effect from 3 May, 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. Also to inflammatory diagnostic kits and reagents for COVID testing and COVID vaccines,” she added.

“This exemption applies to all above mentioned goods when imported free of cost for free distribution in the country by any entity, State government, relief agency or autonomous body on the basis of a certificate issued by a state government,” the Finance Minister said.

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“In order to augment the availability of these items, Government has also provided full exemption from basic customs duty and health cess to their commercial imports. GST at rates varying from 5% (on vaccines), 12% (COVID drugs, oxygen concentrators) is applicable to domestic supplies and commercial import of these items.”

“If IGST Rs 100 is collected on an item, Rs 50 accrues to the Centre and the States each as CGST and SGST 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,” Sitharaman informed.

“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. COVID vaccines are being provided free of cost by the GoI to those who are 45 yrs of age & above and to all frontline workers. On Government supplies, GST is also paid by the Government.” the Union Minister said.

“From the GST collected on vaccine, half is earned by the Centre and the other half by the States. Further, 41% of Centre’s collections also get devolved to the States. So States end up receiving almost 70% of the total revenue collected from vaccines. In fact, a nominal 5% GST is in the interest of the domestic manufacturer of vaccine and in the interest of the citizens.”

“If full exemption from GST is given, vaccine manufacturers would not be able to offset their input taxes and would pass them on to the end consumer/citizen by increasing the price. A 5% GST rate ensures that the manufacturer is able to utilise ITC and in case of overflow of ITC, claim refund. Hence exemption to vaccine from GST would be counterproductive without benefiting the consumer,” Sitharaman mentioned.

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