Cut in GST can make vaccines cheaper, say experts

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  • An array of measures, including reduction in GST (Goods and Services Tax) rates, zero GST rate on critical raw materials, permitting GST-free imports as well as direct cash incentives to producers, can be used by the Central government to make COVID-19 vaccines and other critical supplies cheaper, say tax experts.
  • At present, GST is levied at the rate of 5% on vaccines and 12% on COVID-19 drugs and oxygen concentrators for domestic supplies and commercial imports. For oxygen concentrators imported for personal use, the government has reduced GST rate from 28% to 12% and waived Customs duties.

The defence

  • The Finance Minister had said that exemption to the vaccine from GST would be counterproductive without benefiting the consumer.
  • If the government is exploring free vaccination to all the citizens, then the consumer of such vaccine will be the government. Thus, no matter at what rate it is taxed, it may not directly impact the pocket of the common man. It would be more of a revenue-sharing issue between the Centre and the States.

Options

  • Reducing the GST on final products as well as raw materials, or zero-rating supplies will be a better option than an outright GST exemption.
  • The government could take measures to slash costs, including a possible special incentive scheme to refund taxes, outside the ambit of the GST law.

GST

  • GST is one indirect tax for the whole nation, which will make India one unified common market. 
  • The GST intends to subsume most indirect taxes under a single taxation regime. 
  • GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. 
  • Credits of input taxes paid at each stage will be available in the subsequent stages of value addition, which makes GST essentially a tax only on value addition at each stage. 
  • The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. 
  • This is expected to help broaden the tax base, increase tax compliance, and reduce economic distortions caused by inter-state variations in taxes.
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