Former West Bengal FM Asim Dasgupta says 2% GST on Covid essentials would make sense

As the GST Council debates the different ways of bringing down the taxes on Covid essentials, Asim Kumar Dasgupta, the first chairman of the committee to frame the Goods and Services Tax in the country, told Money9 that a 2% tax will do the trick.

Special rate

“A special rate of 2% can be levied on all Covid essentials. It would bring down the prices that would serve the interest of the common man,” Dasgupta, who is himself recovering from the infection at home, told Money9.

Dasgupta was not in favour of zero-rating the items which was one of the options underscored by Rajya Sabha MP and former deputy chief minister Sushil Modi earlier in the week. Bengal’s current finance minister and Dasgupta’s successor, Amit Mitra also mentioned in his letter to Union finance minister Nirmala Sitharaman during the week that zero rating might be done to lower the prices.

Future trouble

“If zero rating is adopted, the items will go outside the tax net completely and will lead to complications in future,” said Dasgupta,, who had taken up the daunting challenge of unifying India’s bewildering maze of taxes into a single tax structure between 2000 and 2011.

Batting for a 2% GST, Dasgupta said: “The advantage is that it will substantially bring down the prices while allowing manufacturers to claim input tax credit. It won’t break the chain.”

Overcompensated

He felt that all Covid essentials would sell in such huge numbers that the shortfall in the rates will be more than compensated by the rise in numbers, though he admitted that there is an element of rudeness in referring to “compensation” from the point of view of government coffers.

“The interest of common man is directly involved here. Whatever the rates, the GST on all these items have to be brought down,” he remarked.

The entire country is looking forward to the GST Council meeting on May 28 hoping it would device a mechanism that would reduce the price of equipment and consumables that are essential in the management of Covid.

On the agenda of the Council are how to tax items such as vaccines, PPE kits, sanitisers, handwash, and different medical devices relevant to the treatment of Covid.

Taxes now

Right now, vaccines attract a rate of 5% while cotton masks of woven fabrics are taxed at the same rate.

However, alcohol-based sanitisers, handwash and gloves that are deemed as essentials for hygiene now are all taxed at 18%.

Face shields and PPEs and infrared thermometers attract taxes of 18%, while medical oxygen and ventilators and other therapeutic respiration devices are taxed at 12%.

State push

The meeting on May 28 is being held against the backdrop of a few states such as Delhi, Punjab, West Bengal, Chhattisgarh pushing for GST rate cuts on essential Covid items, devices and consumables.

The Centre has already exempted integrated GST on imported stuff such as ventilators, oxygen concentrators and life-saving medicines that have been obtained as relief material from donations and is meant for free distribution.

Sitharaman’s position

In the second week of February Union finance minister Nirmala Sitharaman had tweeted that full exemption from GST might increase the price of different items.

“If full exemption from GST is given, vaccine manufacturers would not be able to offset their inpout taxes and would pass them on to the end consumer/citizen by increasing the price,” Sitharaman had tweeted.

Her response came in reply to a letter West Bengal Chief Minister Mamata Banerjee wrote to Prime Minister Narendra Modi for GST exemption on Covid essentials, including vaccines.