In a series of 15 tweets — written in response to West Bengal Chief Minister Mamata Banerjee’s letter to Prime Minister Narendra Modi — Finance Minister Nirmala Sitharaman on Sunday explained why the Centre levies taxes on COVID vaccines and related drugs and devices.
Banerjee, fresh from her triumph in the Assembly elections, wrote to Modi on Sunday, saying her state is staring at a potential oxygen supply crisis. She further sought a waiver of GST (goods and services tax), custom duty and other levies on medical equipment and COVID related drugs such as Remdesivir. Additionally, she requested Modi to ensure universal 100% free COVID vaccination in the country.
Referring to the letter in her tweets, Sitharaman said a 5% GST on vaccines and 12% GST on medicines and oxygen concentrators are critical to rein in costs. “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,” she tweeted.
With a 5% GST, the manufacturer would be able to utilise input tax credit (ITC), she pointed out. If there is an overflow of ITC, the manufacturer can claim refund, she said, adding: “Hence exemption to vaccine from GST would be counterproductive without benefiting the consumer.”
Exemptions in place
Responding to Banerjee’s plea for a tax waiver on key COVID drugs and related devices, the Finance Minister said such an exemption is already in place. “A list of items for COVID relief granted exemption from IGST (Integrated GST) for imports was issued on 3rd May’21. These were given exemption from Customs Duty/health cess even earlier. Hon CM @MamataOfficial, may notice that items in your list are covered,” she wrote.
“With effect from 3 May, 2021, full exemption from all duties has been provided to Remdesivir injections, Remdesivir API, and for a chemical for the manufacture of this drug,” she added.
Further, of the GST collected on vaccine, half goes to the Centre and the balance to the states, she pointed out. About 41% of the Centre’s collections are also devolved to the states, she wrote.
Banerjee, in her letter, had mooted universal free COVID vaccination to combat the pandemic. Sitharaman responded that the vaccines are already being provided free of cost to frontline workers as well as those aged 45 or more.
The FM’s tweets received mixed responses from her followers on Twitter. Some applauded her for the clarification. Others termed them mere excuses to not take corrective action. Yet others asked to know why letters to Modi were responded to by his ministerial colleagues, and not by the PM himself. Last month, Congress leader Manmohan Singh had written to Modi, to which Health Minister Harsh Vardhan had responded.