Current Affairs

Issue

Finance minister Nirmala Sitharaman has said that giving GST exemptions on essential Covid-19 items would make them costlier.

 

Background

The finance minister was responding to the request made by several state governments and also courts regarding GST exemptions to essential products.

 

Details

• Covid vaccines from abroad as well as produced domestically attract 5 percent tax on GST. The tax rate on oxygen concentrators and drugs stand at 12 percent.

• The argument is that, as GST exemptions are given on drugs and essential medical products, producers will not be able to negate the taxes paid on inputs.

• They will be forced to offset the prices by charging higher cost on customers. It is said that a nominal tax of 5 percent will benefit both producers and consumers.

 

Sharing of the taxes

• The IGST tax on products is shared 50-50 by centre and state. In addition, the centre pays the state a share of its collection as devolution.

• The centre has exempted IGST taxes on relief material imported by relief organisations such as Red Cross.

• The government has also removed customs duty and health cess on the commercial imports of important medical drugs and products.