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Zero tax on Covid-19 vaccine? GST Council's rate panel to discuss issue

The meeting, which happens customarily as a prelude to the GST council meeting, will take place in the backdrop of Finance Minister Nirmala Sitharaman recently striking down demand of West Bengal and Odisha to reduce GST on Covid-19 vaccine

Ahead of the Goods and Services Tax (GST) Council meeting on May 28, Rate Fitment Committee under the Council will meet tomorrow to take up the issue of taxation of Covid-19 vaccine.  

The meeting, which happens customarily as a prelude to the GST council meeting, will take place in the backdrop of Finance Minister Nirmala Sitharaman recently striking down demand of the states like West Bengal and Odisha to reduce GST on Covid-19 vaccine, which currently comes under the 5 percent tax slab.  

Without divulging details a source close to the development told BusinessToday.In that tax rate for the vaccine will be taken up in the meeting tomorrow. "A near zero rate for vaccines will be discussed as full exemption may turn counterproductive," the source said. The final call on the issue will be taken by the Council in its meeting.  

On May 9, West Bengal Chief Minister Mamata Banerjee wrote to PM Narendra Modi demanding reduction in the GST rate for vaccine and other Covid relief materials received by India from abroad.  

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In her response to the letter in a series of fifteen tweets, Sitharaman apprised about the steps taken by the Centre earlier this month to facilitate imports of the Covid relief materials from abroad as pandemic raged.  

However, defending exemption to vaccines and Covid-19 drugs Sitharaman said in one of the Tweets, "GST rates varying from 5% (on vaccines) and 12%  (Covid drugs, oxygen concentrators) is applicable to domestic supplies and commercial import of these items."  

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"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," Sitharaman said in another tweet in the series.  

The fitment committee, however, is now looking into the matter and may bypass the exemption route to rate reduction as it may jeopardise the consumer interest amid the ongoing pandemic. Under a zero-rated supply, the entire value chain of the supply will be exempted from the tax and ease pressure on both consumers as well as vaccine makers.  

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