Coronavirus: Govt unlikely to exempt GST on masks, ventilators, PPEs

GST exemption on such items would lead to blocked input tax credit (ITC), increasing the cost of manufacturing and a higher price for consumers.

20th Apr 2020
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The government is unlikely to exempt GST on medical items like ventilators, PPEs, masks, test kits, and sanitisers as it would lead to blocked input tax credit (ITC), thereby increasing the cost of manufacturing and increase the price for consumers.


There have been demands from certain sections to exempt GST on certain items like ventilators, personal protective equipment (PPEs), masks, test kits, and sanitisers that are essential items for treatment of coronavirus saying that GST exemption on these items would lead to a reduction in prices.


At present, GST on a ventilator is 12 percent; five percent on masks; 12 percent on test kits; 18 percent on sanitisers; and five percent on PPE (costing up to Rs 1,000 per piece) and 12 percent (if the cost is more than Rs 1,000 per piece).
ventilator



Sources said GST exemption on such items would lead to blocked input tax credit (ITC), thereby increasing the cost of manufacturing and a higher price for consumers.


GST exemption on such items would jeopardise the interest of the industry and would not result in any significant gains to consumers, they said adding that in the past, GST exemption on sanitary napkins has led to a similar situation for the domestic manufacturers.


The sources said that while consumers do not gain from GST exemption on these items, the compliance burden would increase for manufacturers as they would be required to maintain a separate account of inputs, input services and capital goods used for the manufacture of these items.


In case, they are not in a position to maintain a separate account, they shall be required to reverse the input tax credit on all inputs and input services used in the manufacturing of exempted PPE after applying detailed calculations.


Further, exempting these items would lead to blockage of ITC for domestic manufacturers but importers would not suffer any such blockage, the sources added.


Earlier this month, the government exempted basic customs duty and health cess on these items (except sanitiser) till September 30. The sources said that while the elimination of customs duty may have been detrimental to domestic manufacturing, it was done to meet the immediate need of such goods to deal with the coronavirus pandemic, considering that domestic supply may not have been sufficient to meet the increased requirement.

(Edited by Saheli Sen Gupta)

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