Mamata Banerjee, the Chief Minister of Bengal, wrote to Prime Minister Narendra Modi on Sunday, requesting tax exemptions on medicines and equipment required to combat the Covid pandemic.
She also urged the Prime Minister to improve health facilities and increase medication and oxygen supplies in Bengal and across India to treat coronavirus-positive patients.
Ms Banerjee said “organisations, individuals and benevolent agencies” had offered aid – from oxygen concentrators and cylinders to cryogenic storage tanks and COVID-19 medicines. She urged the centre to exempt such items from GST and customs duty, so as to encourage private aid”.
“… many of the donors and agencies have approached the state government to consider exemption of these items from duty/SGST/ CGST/IGST. As the rate structure falls under the purview of the centre, I would request that these items may be exempted from GST /customs duty and other such duties and taxes, to help remove supply constraints…” she wrote.
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Hours later Union Finance Minister Nirmala Sitharaman responded people will pay more for Covid-19 medicines, vaccinations, and oxygen concentrators if the GST is not applied to domestic products and commercial imports. Producers will not be able to cover the taxes charged on inputs. Currently, domestic vaccine supplies and industrial vaccine imports are subject to a 5% Goods and Services Tax (GST), while Covid-19 drugs and oxygen concentrators are subject to a 12% GST.
“If full exemption from GST is given, vaccine manufacturers would not be able to offset their input taxes and would pass them on to the end consumer/ citizen by increasing the price. A 5 % GST rate ensures that the manufacturer is able to utilise ITC and in case of overflow of ITC, claim refund. Hence exemption to vaccine from GST would be counterproductive without benefiting the consumer,” Sitharaman tweeted.
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According to the Chief Minister, demand had already risen to 470 metric tonnes per day, and was forecast to reach 550 MT in seven to eight days.
She claimed that the centre, which assesses and distributes oxygen to states, had increased the supply of oxygen generated in Bengal to other states rather than allowing it to stay in Bengal.
Nirmala Sitharaman went on to say that if an item collects Rs 100 in Integrated GST (IGST), Rs 50 goes to the Centre and Rs 50 goes to the States as Central GST and State GST, respectively. States receive an additional 41% of the CGST sales. So, out of a total collection of Rs 100, the states receive Rs 70.50.
“In order to augment the availability of these items, government has also provided full exemption from basic customs duty and health cess to their commercial imports,” Sitharaman said.
A variety of COVID-related relief supplies, including Remdesivir injection and its APIs, Inflammatory diagnostic (markers) kits, medical grade oxygen, oxygen therapy-related equipment such as oxygen concentrators, cryogenic transport tanks, and Covid vaccines, have already been exempted from customs duty. Furthermore, beginning May 3, the government exempted COVID-relief material obtained as a donation for free distribution in the country from IGST, which aided in the speeding up of customs clearances. This exemption will be subject to state-appointed nodal authorities authorising any individual, relief agency, or legislative body to distribute relief materials for free.
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