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Nirmala Sitharaman explains rationale behind taxes on COVID medicines, medical equipment

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Union finance minister Nirmala Sitharaman has responded to the demand raised by West Bengal Chief Minister Mamata Banerjee to waive off taxes on medicines and equipment required for COVID-19 treatment. She said that a full exemption from Goods and Services Tax (GST) will make the medicines and equipment more expensive for the end-users.

Sitharaman explained the rationale behind imposing 5 per cent tax on vaccines and 12 per cent tax on medicines and medical equipment in a string of 16 tweets.

What Nirmala Sitharaman said

She said that if full exemption from GST is given, the domestic manufacturers will not be able to offset taxes paid on their inputs and input services. She said that they would pass these on to the end consumer by increasing the price of their products.

Input tax credit refers to the refund that manufacturers can claim on tax paid on raw materials and services used to make their products, thus making it cheaper. Things with zero tax are not allowed to use this relief, according to current rules.

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The Union minister also said that COVID-19 drugs and related items have already been exempted from import taxes and 70 per cent of the Integrated Goods and Services Tax (IGST) goes down to the states.

What Mamata Banerjee demanded

In a letter to Prime Minister Narendra Modi, West Bengal Chief Minister Mamata Banerjee on Sunday requested him to waive all forms of taxes and customs duty on equipment and drugs being used to fight the Covid-19 pandemic.

“A large number of organisations, individuals and benevolent agencies have come forward to donate oxygen concentrators, cylinders, containers and COVID-related drugs. Many of the donors have approached the state government to consider exemption of these from customs duty, SGST, CGST, IGST,” she said in the letter.

The West Bengal CM had on multiple occasions demanded free COVID-19 vaccines from the Union government for immunising its citizens.

 

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