GST on face masks, PPE Kits, and Sanitisers unlikely to be exempted

Sanchit Aggarwal | Last updated: 21 April 2020

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Amidst the COVID-19 pandemic, essential items like face masks, PPE kits, and sanitisers are crucial. While basic customs duty was exempted on some medical equipment, GST continues to be levied at varying rates. Exempting these items from GST entirely is unlikely due to potential disruptions in the Input Tax Credit cycle for manufacturers, which could paradoxically increase costs for consumers. A more feasible approach might involve reducing GST rates or providing government subsidies to make these vital products more affordable.

The outbreak of the deadly coronavirus is a challenging time for the whole country. No sector has been left untouched and unaffected. It has brought regular activities to a halt. The cases of COVID-19 affected people are shooting up every day and governments across the world are trying all they can to spread awareness among the general public about the preventive measures.

In this time of crisis, no one can deny the importance of products like a face mask, hand sanitizer, PPE Kit, and ventilators to prevent the risk of exposure to the virus. During the time of nation-wide emergency and when the economy is under tremendous pressure of World-wide economic slowdown, our country's Finance Minister, Mrs. Nirmala Sitharaman has somehow made an effort to reduce cost burden in case of some essential and vital equipment's on the final consumer.

Earlier this month, the government exempted basic customs duty and health cess on following medical equipment in order to tackle COVID 19 (except sanitizer) till September 30th, 2020.

• Artificial respiration or other therapeutic respiration apparatus (Ventilators)
• Face masks and Surgical Masks
• Personal Protection Equipment (PPE)
• COVID-19 testing kits
• Inputs for Manufacturing of above items

GST on Face Masks, PPE and Sanitisers: Exemption Likely

However, GST on the following products continued to be levied at the following rates:

NAME OF THE ITEM	APPLICABLE RATE OF GST (%)
Ventilators	12
Face Mask	5
Test Kits	12
Sanitizers	18
PPE (Costing upto 1000)	5
PPE (Costing more than 1000)	12

What are the components of PPE?

As per the official notification of the Ministry of Health and Family Welfare, components of PPE(Personal Protective Equipment) include goggles, face shield, masks, gloves, overalls, headcover and shoe cover.

Even after having exemptions from Custom Duty and Cess, the above Rates of GST charged on these highly essential items have left us with certain questions:

Why can't the government of India exempt these essentials commodities from the provision of GST? Are they having the objective of earning revenue out of the growing sale of these items? But in reality, is it that simple to eliminate such items from charging GST.

In the current market, scenario government is unlikely to exempt these goods from the provision of GST, since it will lead to Blockage Input Tax Credit availed on sale of these items, thereby increasing the cost of manufacturing and a higher price for consumers.

Exemptions from GST will lead to an increased cost for the manufacturers since no ITC or Refund can be claimed in case of sale of exempted goods further leading no relaxation in cost to the customer. (Since the burden of Indirect Taxes are transferable till final consumption).

Following are certain consequences of GST exemption on these vital products:

• Break of Input Tax Credit cycle of manufacturers
• A refund cannot be claimed under Inverted Duty Structure under GST (Exception for Exempted goods)
• Increase in cost to the customer
• The decline in GST collection to the Government from revenue generated from the sale of such items

In view of the above consequences, there are mixed opinions among the citizens relating to whether to exempt or not to exempt these items from provisions of GST. But a solution can be derived in between somewhere:

1. Reduce the GST Rates till the minimum level say flat 5% but not exempting them entirely so that manufacturer can claim Refund or ITC as per GST provisions or allow them to claim ITC or Refund in case of sale of these essentials till the time this pandemic is defeated.

2. Furthermore, the government can subsidize sale and manufacturing of Masks, ventilators, Test kits, etc in order to reduce the present cost burden on the pockets of the final customer.

Conclusion:

It seems highly unlikely that the government will exempt these essential commodities from GST. However, rates on such items can be considerably reduced to ensure that they are affordable to anyone in the whole country.

What are your views on GST levy on these essential commodities in the time of crisis?

FAQ :

It is unlikely that face masks, PPE kits, and sanitisers will be completely exempted from GST. While some medical equipment received customs duty exemptions, GST continues to apply.

Currently, the GST rates are: Ventilators at 12%, Face Masks at 5%, Test Kits at 12%, Sanitisers at 18%, and PPE kits at 5% (costing up to £1000) or 12% (costing more than £1000).

Exempting these items from GST could break the Input Tax Credit cycle for manufacturers, potentially increasing manufacturing costs and final prices for consumers. It could also lead to a decline in government GST collection.

Instead of full exemption, solutions proposed include reducing GST rates to a minimum, such as a flat 5%, or allowing manufacturers to claim refunds or Input Tax Credit on sales of these essential items. Government subsidies for manufacturing and sale are also suggested.

According to the Ministry of Health and Family Welfare, PPE components include goggles, face shields, masks, gloves, overalls, headcovers, and shoe covers.