The GST Implications on Russian Vaccines Sputnik V: An Analysis

The Bharatiya Janata Party (BJP) government's decision to charge 5% GST on Russian vaccines, such as the Sputnik V, has sparked controversy. While some argue that the imposition of GST is crucial for the proper functioning of the Goods and Services Tax (GST) system, others question its necessity for vaccines.

The GST Law and Its Applicability

Broadly speaking, the GST law in India mandates the imposition of GST on all goods and services. When GST is applicable to Indian vaccines, it must also apply to imported ones, as per the law.

Current GST Rates

Currently, GST rates vary between 5% on vaccines and 12% on other items such as COVID drugs and oxygen concentrators. This applies to both domestic supplies and commercial imports of these items.

Revenue Distribution

For an item subject to a total IGST of 100, 50 is collected by the Centre as CGST, and 50 by the States as SGST. An additional 41% of the CGST revenue is devolved to the States. Thus, out of a collection of 100, the States receive nearly 70.50 as their share.

Despite considering the complete exemption from GST, the domestic producers of these items would be unable to offset taxes paid on their inputs and input services. As a result, such exemptions would likely lead to an increase in prices, as producers pass on the taxes to consumers. This would go against the government's aim of providing affordable healthcare.

Government's Role in Vaccine Distribution

India's Government of India (GoI) offers free COVID vaccines to individuals aged 45 and above, as well as frontline workers. On government supplies, GST is also paid by the government itself. Hence, the distribution of vaccines, whether domestic or imported, adheres strictly to the GST law.

Consequences of GST on Vaccine Producers

A nominal 5% GST rate benefits the domestic manufacturer of vaccines as well as the consumers. This rate ensures that the manufacturers can use Input Tax Credit (ITC). In the event of excess ITC, they can claim refunds. Exempting vaccines from GST would be counterproductive, as it would negate the benefit of ITC for manufacturers without significantly benefitting consumers.

Political Hypocrisy and Other Issues

While some argue about the necessity of GST on vaccines, there are other instances where the Modi government and its ministers have shown political hypocrisy and atrocity. Nirmala Sitharaman, a cabinet minister, advised the government to charge GST at a slab rate of Rs. 200 on imported vaccines during a GST meeting on May 28, 2021. She also ordered that GST would be imposed on onions.

During a media query, when asked why diesel and petrol prices were rising, Nirmala Sitharaman blamed Indian Oil Companies (IOC) and oil-producing countries, deflecting accountability. It is noted that while the Russian government provided the Sputnik V vaccines to India free of cost, they were often sold through Adani or Ambani groups under manipulated pricing schemes.

Conclusion

In conclusion, the imposition of GST on Russian vaccines Sputnik V is a complex issue. While the government's aim is to ensure fair revenue distribution, critics question the necessity of GST for vaccines. The affected parties need to critically examine the GST implications and seek a balance that benefits both manufacturers and consumers.