Exclusive: GoM for retaining 5% tax on Covid jabs; tax cut on PPEs, ventilators, sanitisers

The Group of Ministers (GoM), constituted by the Goods and Service Tax (GST) Council last week to look into the tax rate on Covid vaccines and other equipment, has recommended retaining the GST rate on Covid-19 vaccine at 5 per cent, while suggesting tax cut on a slew of Covid-related items like ventilators, personal protective equipment (PPE) kit, among others, for three months.   

The recommendations have been submitted to finance minister Nirmala Sitharaman on Thursday.

"The GoM has recommended retaining the GST on Covid-19 vaccines at 5 per cent owing to the issues related to the input tax credit. The panel has also recommended the GST cut on ventilators, PPE kits, and hand sanitisers, among others, to 5 per cent from the current slab of 18 per cent," a source told Business Today on the condition of anonymity.

"On ventilators, the GoM was of the view that lowering of the tax rate will help the smaller hospitals procure the equipment, which is of critical importance during the pandemic. Also, a lower tax rate will incentivise the donors to purchase ventilators and donate it in the interior areas of the country which lack medical infrastructure," said the source.

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The reduced rates will be applicable for three months till August. The report will be forwarded to the GST Council for final approval. The GST Council's GoM held a marathon meeting on Thursday and submitted its recommendations four days ahead of the 8-June deadline.    

The issue of a tax rate cut on Covid-related goods and equipment was taken up in the council meeting on May 28. The meeting, however, could not reach a consensus and instead decided to constitute a GoM on the matter headed by Meghalaya CM Conrad Sangma.   

Ahead of the Council meeting last week, the rate fitment committee, under the council had recommended a reduction in GST rates of medical grade oxygen, oxygen concentrators, pulse oximeters and covid test kits.

Also read: Govt forms GoM to examine GST relief on Covid vaccines, other equipment

The committee, however, had recommended against any tax reduction on PPEs, ventilators and other Covid equipment.  

Earlier, responding to West Bengal Chief Minister Mamata Banerjee's letter demanding the GST reduction on Covid-19 vaccines, Union finance minister Nirmala Sitharaman said the tax reduction on vaccines will lead to an increase in price as manufacturers will not be able to offset their taxes with the taxes paid on inputs and pass it on the end consumers. The GoM, too, has taken the same line in its recommendations.

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