Union Finance Minister Nirmala Sitharaman on Sunday said that the 5% tax imposed on Covid-19 vaccines and 12% on medicines and oxygen concentrators was required to maintain costs.
The minister explained the rationale behind the taxes hours after West Bengal Chief Minister Mamata Banerjee wrote to Prime Minister Narendra Modi, urging him to waive all forms of taxations and customs duty on medical equipment and drugs used to treat Covid-19, reported PTI.
“A large number of organisations, individuals and benevolent agencies have come forward to donate oxygen concentrators, cylinders...containers...and Covid-related drugs,” Banerjee’s letter to Modi read. “However, many of the donors have approached the state government to consider exemption of these from customs duty, SGST [State Goods & Services Tax], CGST [Central Goods and Services Tax], IGST [Integrated Goods and Services Tax].”
The West Bengal chief minister said that as the rate structure was under the Centre’s purview, she urged that these items may be exempted from GST or customs duty. “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 the Covid pandemic,” Banerjee said.
Hours later, Sitharaman responded to Banerjee’s letter, saying that the Union government had already granted exemption from IGST for imports on May 3. “These were given exemption from Customs Duty/health cess even earlier,” she said in a series of tweets. “Chief Minister Mamata Banerjee may notice that items in your list are covered.”
Sitharaman said that full exemption from Customs duties, including IGST, was already available to all Covid relief material imported by the International Committee of the Red Cross for distribution in the country.
“With effect from 3 May, 2021, full exemption from all duties has been provided to [anti-viral drug] remdesivir injections, remdesivir API, and for a chemical for the manufacture of this drug,” the minister tweeted. “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.”
The Union finance minister added that if there was complete GST exemption, then domestic producers of the 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 added that the Covid-19 vaccines were being given for free to those who are 45 and above.
“On government supplies, GST is also paid by the government,” she tweeted. “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.”