GoM Examines Tax Exemptions For COVID Vaccines, Updates GST Council

GoM Examines Tax Exemptions For COVID Vaccines, Updates GST Council
Source: India Today

The Goods and Services Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, is expected to consider a GST rate reduction for COVID-19 relief essentials and drugs for treating black fungus. GST Council members will meet in response to a report presented on Monday by a Group of Ministers (GoM). 

As an outcome of the May 28 council meeting, the GoM was mandated to examine tax exemptions and concessions offered for COVID vaccines, drugs, and equipment. As stated in the GoM report, no changes are recommended for the COVID vaccine prices. Additionally, the GoM proposes to maintain the current rates for PPE kits (5%), N95, surgical masks (5%) and ambulances (28%). Furthermore, Amphotericin B used in the treatment of black fungus had been exempted from tax. A number of states have requested full tax waivers on COVID-19 vaccines, medications, and equipment.

The last GST Council meeting saw detailed discussion of COVID-related issues, according to Sitharaman. “The Council has decided to exempt the import of relief items even if they are purchased, if these are meant for donating to the government, or on recommendation of any state government to any relief agency. This exemption is extended till August 31, 2021,” she said.

In regard to still-unchanged vaccine rates, the GoM stated,“The GST rate on vaccines has been one of the most contentious issues. It examined the issue with utmost care, minutely exploring all options”. 

According to the Business Standard, the council said, “Apart from the proposals for zero rating or lower rate like 0.1 per cent, the GoM also discussed in detail the proposal for fully exempting GST on vaccines or providing a differential rate structure for vaccine procurements by the Centre, states, and private parties”. As reported, it was determined after “exhaustive deliberation” that more than one tax rate structure for vaccines would not be feasible.

Additionally, the GST Council approved an exemption for free distribution of COVID-19 vaccines, even if they are imported on payment basis, until August 31, which can be extended.

After the change in vaccination policy, some states will likely be able to lower vaccine rates even though the GoM has not changed the rate. As the Mint reports, this is due to the Center acquiring 75 percent of total vaccine production in the country and providing them free of charge to its state partners. Privately procured vaccines would be subject to GST of 5 percent on 25 percent of the purchase price. Medicines are part of the COVID-19 treatment and the GoM, unlike vaccines, believes most patients bear the cost of medicines being used.


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In addition, the GoM took into account that certain medicines used for COVID-19 treatment are expensive and thus, lowering the GST rate should be given serious consideration. The Council addressed the issue of a tax rate reduction on COVID treatment related equipment and goods. Nonetheless, the central government objected to the taxation of these items, stating that it may not benefit the general public. In order to combat the pandemic crisis, the GoM argues that domestic capacity creation in the short and medium run is crucial. Further, it considered the possible long-term implications of any suggested changes to tax rates on the demand and supply sides, the impact on consumers, and the revenue streams of the government from any changes in taxation. The report asserted that the GoM tried to come to consensus on its recommendations.

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