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GST on Vaccines in India to treat COVID

Updated on:  

08 min read

Here is some important and useful information on Covid19, its prevention, treatment, post-infection care and vaccination shared by Dr. Parinitha Kaza, MBBS, MD, Specialised in Microbiology and Infectious Disease, and Dr. Harshith Rao, Academic Senior Resident (DM Pulmonary and Critical Care Medicine). This information has been compiled by ClearTax.

Are the sale of vaccines taxable under GST?

Vaccines are life-saving drugs, just like medicines, classified as goods under GST. The supply of vaccines for business purposes with consideration is taxable under Section 7 of the CGST Act. However, the manufacturer will not be eligible to claim the input tax credit on the raw materials or services used in the supply of vaccines obtained without any charge.

The vaccine to fight the COVID-19 pandemic will only be purchased by the Indian government and its state governments from the respective vaccine manufacturers. It shall be based on contracts and is going to be a continuous supply of goods. Accordingly, the invoicing rules for the same need to be followed.

The place of supply provisions will be the place of destination where the vaccines are distributed. For example, if M/s Serum Institute of India supplies vaccines to the Karnataka government, the place of supply shall be Karnataka. Since the vaccine maker has a place of business in Pune and Maharashtra, the tax charged will be Integrated Goods and Services Tax (IGST). Likewise, M/s Bharat Biotech, situated in Hyderabad, supplies to West Bengal. The place of supply will be West Bengal and therefore chargeable to IGST.

There are currently two domestically manufactured vaccines approved and purchased by the Indian government for starting the mega vaccine drive. One internationally recognised vaccine will also be imported into India. In the future, these will be joined by several other domestic manufacturers.

The value of the supply of vaccines for GST purpose will be the transaction value at each supply level. Further, it will include the ITC benefit at each stage for offsetting the GST paid at the procurement level. The costs will consist of research and development, the results of which were definite, human resource, medicinal components used such as the antigens, stabilisers, adjuvants, antibiotics, and preservatives.

As far as exemptions under goods for the pharmaceutical industry is concerned, only contraceptives, sale of human blood and its components are exempted. Hence, vaccines continue to be charged to tax under GST.

Chargeability of tax on the import of vaccines

While domestic manufacturers are expected to generate most of the supply, imports will also play a vital role in this process. The process for the vaccines’ storage and transportation is already in place at major international airports.

Vaccines for human medicine are classified under the tariff number-300220. The vaccines imported from foreign countries will attract 10% towards basic customs duty, and 10% towards social welfare surcharge under the Customs Tariff Act, 1975. Further, IGST at 5% is charged on it.

It must be noted that the Central Board of Indirect Taxes and Customs (CBIC) has relaxed the import and export norms of vaccines through couriers without any value limits in December 2020. For this purpose, it has amended the Courier Imports and Exports (Electronic Declaration and (Processing) Amendment Regulations. It was suggested that a dedicated task force is set up to ensure proper clearances of vaccines.

What are the GST rates on vaccines for COVID?

The GST rate charged for the vaccine is 5%. The following are the particulars of HSN code under GST for vaccines:

ChapterDescriptionHSN CodeGST Rate
Drugs & PharmaceuticalsAnimal or Human Blood Vaccines3002 / 30065%

For example, every dose of the vaccine that has been priced at Rs.200 will attract GST of Rs.10, taking the price to Rs.210 for the Indian government.

GST on transportation and warehousing for vaccines

Any vaccine requires cold storage facilities for preservation which must conform to the World Health Organisation (WHO) standards. The GST rate charged for refrigerated storage facilities in India is 18% under the HSN code 996721.

Transportation of vaccines can be counted as transportation of any goods as per the CGST Act without special benefits. If the manufacturer is availing services of the Goods Transport Agency (GTA) for distribution, the GST paid on it can be either 5% or 12% depending on the GTA’s choice to avail ITC or not, respectively. If the manufacturer has an in-house transport facility, it shall attract the composite supply of both vaccines and the transport service. Accordingly, the rate of 5% will be charged on the transportation cost.

Budget 2021 expectations for tax concessions on vaccines

The upcoming Budget 2021-22 looks promising to healthcare establishments. Several concessions are expected to be announced for the vaccine manufacturing companies under the income tax and GST laws in the form of tax holidays and exemptions. But in such cases, necessary steps must also be taken to expedite the refund of the tax credits on inputs and input services so that it does not lead to a price rise.

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