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GST Council meet: Tax cut on medical oxygen, concentrators, oximeters likely; no relief on vaccines, PPEs

As per recommendations of rate fitment committee, only four Covid-related items could see changes in tax structures. In doing so, the committee has left out over 10 Covid-related items from tax relief, most importantly, vaccines

Covid items left out by rate fitment panel includes PPE kits and N-95 masks, triple-layer masks and surgical masks. They are currently under the GST slab of 5 per cent Covid items left out by rate fitment panel includes PPE kits and N-95 masks, triple-layer masks and surgical masks. They are currently under the GST slab of 5 per cent

The upcoming Goods and Service Tax Council (GST Council) meeting is likely to provide tax relief on a number of Covid management equipment like medical grade oxygen, oxygen concentrators/generators, pulse oximeters and Covid testing kits. It may, however, leave out vaccines and a wide variety of other pandemic relief equipment like PPE kits, N95 masks, ventilators, hand sanitisers and RT-PCR machines, among others, even as the pandemic continues to ravage the country.

As per the recommendations of the rate fitment committee, which advises the GST Council on the tax slab changes, only four Covid-related items could see changes in the tax structures. In doing so, the committee has left out over 10 Covid-related items from tax relief, most importantly, vaccines.

Also read: Exclusive: GST Council to discuss Covid cess on power, pharma sector in Sikkim

Going forward, the GST Council is likely to reduce the tax rate on medical grade oxygen, oxygen concentrators/generators, pulse oximeters, and Covid testing kits from 12 per cent currently to 5 per cent. On these items, the reduced rates will be applicable till July 31, while on the testing kits, it'll be applicable till August 31 this year.  The council will take the final decision on the recommendations of the fitment panel in its upcoming meeting on May 28.  

The fitment committee, which held deliberations on providing GST relief to Covid-19 vaccines last week, is of the view that the vaccines are already under the lowest slab of 5 per cent. Sources have indicated to Business Today that the panel toed the same line that finance minister Nirmala Sitharaman took while responding to West Bengal chief minister Mamata Banerjee' letter earlier this month that demanded tax relaxation on Covid vaccines.

Sitharaman, while responding to Banerjee, said that 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 to the end consumers.

Also read: FM Sitharaman to chair 43rd GST Council meeting on May 28

A source pointed out, "No alternative mechanism like zero rating of vaccines to exempt the entire value chain of vaccines has been considered by the committee, which has suggested a status quo on GST slab for vaccines."  

A slew of other Covid items that have been left out by the rate fitment panel includes PPE kits and N-95 masks, triple-layer masks and surgical masks, which are currently under the GST slab of 5 per cent. The GST Council is also unlikely to provide any relief on ventilators (12% currently), hand sanitisers, temperature check equipment, which are charged at 18 per cent currently.    

The fitment panel has also recommended against any reprieve to ambulance services (28% currently), portable hospital units (18%), RT-PCR machines (18%), RNA extraction machines (18%), genome sequencing kits machines (12% and 18%), and specified inflammatory diagnostic kit (12%) .   

In fact, reacting sharply to the GST Council agenda, Punjab finance minister Manpreet Singh Badal, in a letter to Sitharaman, said the agenda of the Council does not reflect the reality of the current times.  

The letter reviewed by Business Today says, "It is baffling that despite the crisis our country finds itself in, with millions of people suffering the consequence of Covid and inadequate health infrastructure, taxes this high continue to apply on basic essentials needed to overcome this life-threatening disease that has engulfed the entire world."   

On the reduction of taxes on the medicines and drugs being used for Covid management, the fitment committee is of the view that since the treatment protocol is a dynamic process and keeps on evolving, it may be not practical to identify a particular drug or set of drugs for the purpose of the tax cut.

Also Read: GST Council agenda mundane, does not address issues: Punjab FM to Nirmala Sitharaman