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GST on Covid vaccines needs to be removed till the end of the crisis

The GST Council, the body made of finance ministers from the Centre and states, is scheduled to meet later this week. According to media reports, an item on the agenda is expected to be a discussion on the removal of GST on Covid vaccines.

GST on Covid vaccines should be removed without delay. Till now, there has been an argument made against the idea by finance minister Nirmala Sitharaman. It is unconvincing.

GST on the entire input chain to manufacture can be removed to ensure that both the price of the vaccine comes down and the manufacturers are not penalised for it. This is not a new concept. Exports from India are exempt from GST through zero rating, a method by which the entire value of supply is exempt from tax. This is done to allow exporters to remain competitive as countries export goods and services, but not local taxes.

The context to at least a temporary waiver of GST is two-fold. Vaccination is the best bet in reining in Covid-19 and allowing the economy to function normally. Between the Centre and most states, the majority of vaccination costs are to be covered. Therefore, any reduction in GST does not mean a net loss to governments as their vaccination costs will come down by the same level.



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