After several clinical trials, two COVID-19 vaccines have been granted the license in India. This vaccination drive is one of the significant leaps in India’s public health history. Taxation laws for these vaccines need to be critically analysed. In this article, we shall discuss the following:
The Prime Minister launched the COVID-19 vaccination drive on 16 January 2021. Two types of COVID-19 vaccines have been approved for the vaccination drive. These are:
- Covishield vaccine (made by Serum Institute of India Ltd.)
- Covaxin vaccine (made by Bharat Biotech International Ltd.)
The Covishield vaccine has been supplied to all states and union territories, and the Covaxin vaccine has been supplied to 12 states.
In the first run, the COVID-19 vaccine was made available to the healthcare and frontline workers. The second group eligible for the vaccine would be people over 50 years of age and people under 50 years who have specified health conditions.
- Vaccines are lifesaving medicines which are treated as goods under GST. As of today, COVID-19 vaccine will also be treated like goods (in line with other vaccines). As per the GST laws, supply of goods or services or both which is made for a consideration in the course of business will attract GST under Section 7 of the CGST Act, 2017.
- The place of supply will be the place where the vaccines are distributed. Currently, the COVID-19 vaccine can be purchased only by the Indian Government and its State Governments (from the respective vaccine manufacturers).
- The value of supply for vaccines under GST will be the transaction value at the supply level. The cost will include research and development costs (the cost of the trial, which gave a positive result), raw materials cost, labour cost, etc.
- Vaccines do not come under exempted pharmaceutical goods; hence, it is taxable under GST.
The COVID-19 vaccine comes under the chapter ‘Drugs and Pharmaceuticals’. Under this chapter, any animal or human vaccine is charged at 5% (HSN Code 3002/3006). That means, 5% GST will be charged on the cost of the vaccine.
For example, If the vaccine costs INR 260, the same will attract a GST of INR 13 (260*5%). However, the manufacturers are not eligible to claim any Input Tax Credit (ITC) for the tax paid on the goods and services used in the vaccines’ supply.
Although a majority of the COVID-19 vaccines for India are expected to be manufactured in India, import of COVID-19 vaccines may be possible in the future. Under the Customs Tariff Act, 1975, vaccines attract a Basic Custom Duty of 10% and Social Welfare Surcharge of 10%. Additionally, IGST of 5% will be chargeable at the time of sale. The duties are currently under assessment by the Central Government, and it may be lowered to boost the supply of COVID-19 vaccines in the country.
As per the CGST Act, 2017, transportation of goods includes transportation of vaccines as they are treated at par with other goods. The manufacturer, using the services of a Goods Transport Agency for distribution of the COVID-19 vaccine, will be charged GST at 5% or 12% (of the freight cost). This will be dependent on whether the Goods Transport Agency has chosen to avail ITC or not. In case inhouse transportation services are used by the manufacturer, the supply will be treated as a composite supply and 5% GST will be charged on the freight costs.
One of the essential requirements for storing the COVID-19 vaccine is cold storage. As and when the authorised manufacturers produce large quantities of the vaccine, the need for cold storage facilities will become critical. Currently, GST on ‘Provision of cold storage services’ is 18%.
The Government is yet to announce about the applicability of GST on the COVID-19 vaccines. Once it is published, the questions around the taxability of COVID-19 vaccines will be answered.