On March 11, the WHO or World Health Organisation declared the Corona a global pandemic. On 24, March 2020, the Indian government announced a nationwide lockdown in the country to contain the COVID -19 and flatten the curve. The lockdown halted any economic activity in the country, leaving the economy in crisis. The COVID-19 had its ripple effects on closely everything, including the Goods and services taxes. The government has relaxed the GST norms and extended the deadlines to ease the GST process for individuals.There is a shift in the gst rates in India due to sudden change.
Corona is a deadly disease, and containing it requires a considerable effort from the government, citizens and especially health workers. It demands good numbers of ventilators and masks to free the patients from the clutches of the diseases and control the spread of the diseases. It was expected by many that the government will exempt the GST on masks and ventilator. People thought the government needed to exempt Good and services tax on certain items like ventilators, personal protective equipment, masks, test kits and sanitisers that are essential items for treatment of COVID-19 saying that the exemption on these items would lead to lower their prices. However, there seems no or very less rationale behind this logic.
The exemption of the GST status on these will lead to a blocked input tax credit which will hike the prices for the manufacturing and eventually for the consumers.
GST on protection gears and equipment
- The ventilator attracts GST of 12 per cent;
- on the mask, GST is 5 per cent;
- on test kits, GST is 12 per cent;
- on sanitiser, GST is 18 per cent;
- and on PPE, GST is 5 per cent (costing up to Rs 1,000) and 12 per cent (if the cost is more than Rs 1,000 per piece).
Things are not as easy as it seems, it may seem that exempting GST is one of the paths for the flatting the curve but exemption is GST will not help. It will only threaten the interest of the manufacturers and will further have the domino-effect on the individuals. GST exemption will reduce the benefits for the Indian based firms associated with the production of the mask and ventilators, which will further lead them to halt the production. This will eventually result in the purchase of sub-standards import from China. It will ensure that the consumer shows a shift towards imported goods. Therefore, incentivising imports by the reduction of GST, at the cost of domestic units, may not be a desirable option
The exemption on GST in these items will only ensure that the manufacturer proceeds for the blocked input tax credit. This new tax will increase the compliance burden on the manufacturers and will increase their cost and prices for the consumers. The Indian government exempted basic customs duty and health cess on these items, and that is an excellent step to decrease the cost for the consumers.