GST on Covid Supplies

We all know that the whole world including, India, is being adversely impacted by the Coronavirus pandemic and is fighting hard to save lots of humanity. The medical warriors and frontline workers are leaving no stone unturned in treating covid patients and inventing vaccines.

To defeat this virus, we’d like an adequate supply of medical goods like santizers, masks, drugs, healthcare facilities, and medical practitioners. Unfortunately, on one side, there’s a shortage of essential goods required in COVID treatment. On the opposite side, consumers and other stakeholders are demanding either a reduced rate or exemption from Goods and repair Tax (GST) on these things to form them affordable accessible of affected persons.

Presently, GST is levied at the following rates on various COVID related supplies:

However, Central Government has recently provided an ad-hoc exemption from charging essential customs , Integrated Goods and repair Tax (IGST), and health cess on importing COVID-related supplies in India. IGST has also been exempted on imported goods donated and distributed in India on a free-of-cost basis as a COVID relief.

As a result of the exemption above, provisions concerning input tax credit availability has undergone the following change:

If the demand of the people is adhered to by giving total exemption from GST on output supply of covid related goods, then, as a result, manufacturers of such goods wouldn’t be ready to depart their input credit taxes availed on purchase of raw materials. Hence covid related goods would be sold to the top consumers at higher prices.

Under the GST law, a registered person may claim a refund of any unutilised input decrease at the top of any tax period if zero-rated supplies are made without tax payment. But, no refund of the input decrease are going to be allowed where the credit has accumulated on an inverted duty structure except on supplies of specified goods and services. An inverted duty structure arises when the rate on inputs is above the rate on output supplies. As an alternate, if the GST rate is reduced on output supplies without a corresponding reduction within the GST rate of raw materials purchased, it might cause the buildup of enormous input decrease again, leading to a better price of such goods.

Therefore, exempting all COVID-related raw materials and output supplies from charging GST is that the need of the hour, and therefore the refore the Goods and repair Tax Council and the CG should take a pre-emptive decision on this.