Earlier it was suggested that the Union Finance Ministry was not in favor of granting complete GST exemptions on essential medical goods as it could lead to additional tax costs in the supply chain due to blockage/reversal of input tax credit. In line with this, the GST Council has exempted only a few of the essential drugs from GST. In most cases, the GST Council has adopted an approach of reducing GST rates rather than a complete exemption to avoid blockage of GST credit.
It is expected that these rate reductions on key medical items such as Amphotericin B, Remdesivir, Medical grade oxygen, etc., will boost the nations' fight against COVID-19 by making these items available at affordable prices.
The Council could have also explored the possibility of granting a refund to the final supplier in the supply chain discharging GST but not collecting from the buyer. This may not be a simple possibility under the present framework of the GST law. Hence, a refund may have to be granted outside of GST law subject to non-collection of tax from ultimate customers. This could have helped avoid any disruptions in credit flow and also ensure that passing of GST cost on end consumers is viably avoided.
Furthermore, now that vaccination drives organized by various public/private sector organizations to their employees are thriving, clarity on levy of GST on doses administered to employees/their dependants, ITC claim, GST applicability for arranging the administering of vaccines, etc. would have been highly appreciated by the industry.