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GST waiver on PPE will make product costlier

It has been advised by the experts on removing Goods and Services Tax (GST) on personal protective equipment (PPE). This proposal of removing GST on PPEs has been considered after the government received several requests on the ground that the exemption would lead to reduction in prices and would benefit the fight against Covid-19.

But GST is a value-added tax which collected at each stage of the supply chain on net basis. Exemption would block input tax credit (ITC) which manufacturers of PPEs will pay on inputs but cannot claim ITC because the final product is tax-free. This will increase the cost of manufacturing.

Therefore, while consumer does not gain from GST exemption, the compliance burden would rather will be increased for manufacturer. The manufacturer would be required to maintain separate account of inputs, input services and capital goods used for manufacture of PPE.

While GST exemption to PPE would lead to blockage of input tax credit for the domestic manufacturer, import would get price advantage over the domestic product which will bring substandard Chinese products to India in a bulk quantity, which is indeed not advisable .

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