The fitment committee of the GST Council, a key panel of Centre and state officials which looks into tax rate changes, has recommended against lowering the tax rate on vaccines from the present 5%.
It said that granting complete exemption would result in increased cost of production, because the domestic manufacturers of Covid-19 vaccines would not be able to take input tax credit for tax paid on their input goods and services.
Some states have demanded that vaccines be exempted or be levied a minimal tax rate of 0.1%
The committee has recommended reduction in medical grade oxygen, oxygen concentrators and pulse oximeters to 5% from 12% till the end of July. For Covid-19 testing kits, the rate reduction to 5% has been recommended till August-end.
The key panel of officials has argued that since vaccines were almost entirely being procured by the central and state governments and being provided free of cost, the GST would eventually accrue to the Centre and states.
Despite the demands for lowering tax rates on Covid-19 related drugs and medicines, the committee has not given any recommendation as Covid-19 treatment protocol was being altered based on new learnings.
The recommendations are likely to be taken up at the GST Council meeting on Friday, following which a final decision will be taken.