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Need Of The Hour: GST Exemption/ Refund for Medical Equipment Required For COVID 19

It is imperative that the government now exempts medical equipment and PPEs from GST and other ancillary taxes immediately.

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Humanity is facing an unprecedented lockdown, with large swathes of the global population under complete lockdown. The Covid-19 pandemic has epitomized globalization, affecting most nations with varying degrees of chaos, financial burden and increased mortality. Like most nations, the Government of India has rapidly responded to the ever evolving situation. Measures announced include a 21 day lockdown throughout the country, relief package for the needy, relaxation in various statutory compliances for trade and business and various steps by RBI to inject liquidity across supply chains.

Our health workers and medical ecosystem has been at the forefront of fighting back against the pandemic. However as cases continue to spiral upwards, scalability and robustness of our health infrastructure remain to be primary concerns. There is an evident shortage of ventilators, testing kits, masks, and personal protective equipment (PPEs). Production of these essential items is now being sourced from local manufacturers and being imported from other countries, including China. Hospitals across the country are expecting the government to help with speedy and cost effective procurement of PPEs and safety gear.

Authorities recently announced tax refunds to the tune of Rs. 18,000 crores. Hence, it is imperative that the government now exempts medical equipment and PPEs from GST and other ancillary taxes immediately. To ensure that the price of said products does not increase exponentially, the manufacturers should be allowed to avail refunds of the GST paid on materials and services consumed in manufacture of said products. Not only will this drastically reduce the cost, but it will enable the transfer of benefits across the entire value chain. Another solution could be to temporarily treat the sales by manufacturers of essential health equipment on par with Export/SEZ sales and refund of inputs/input services be provided to them. If manufacturers are not incentivized to rapidly increase production through these subsidies, they will have to factor the GST on inputs as a cost and that will eventually drive up prices.

Alternatively, if there is any apprehension about the above exemptions being misused, the government might also consider giving refund for GST paid on purchases of specified material and PPEs at least to hospitals, health clinics, NGOs and other related entities. However the process should be simple and immediate to ensure that there is no blockage of funds.

To facilitate import of protective gear, exemption from Basic custom duty and IGST on said imports will assist in importing larger quantities at competitive rates. The Union Government has already taken steps towards this, a much needed move.

Even Government of Maharashtra (GOM) has received requests from corporate and NGOs to exempt COVID-19 outbreak-related medical equipment from GST. GOM has in turn written to the finance ministry that exemptions of GST on medical equipment would be highly helpful in combating the novel coronavirus in the country. The savings of 5 %, 12 % or 18 % of GST on the purchases would be very substantial for procurement of said materials.

The Government has been very proactive in taking various measures and initiatives to combat Covid 19. Till date, India has been relatively successful in ensuring that the virus doesn’t spread out of bounds by adopting necessary precautions and measures. Giving GST benefits for medical equipment and gear required for combatting Covid 19 would enable scale of manufacturing, easing of liquidity and last mile delivery even to centres with lesser resources. The government needs to be implored to ensure that all legal, technical and

bureaucratic issues under GST Act for an exemption/refund mechanism be overcome as the situation is of utmost urgency and any lapses of time would face severe consequences and cause unimaginable grief and pain to citizens across the country.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Parag Mehta

Partner, NA Shah Associates

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