Exempting personal protective equipment (PPE) like surgical masks, ventilators and sanitisers, testing kits from Goods and Services Tax will not benefit either the producer or the consumer, government sources told Network 18.

Share Market Live

NSE

At present sanitisers have a GST of 18 percent, ventilators and testing kits 12 percent each, coveralls have a GST of 12 percent if the price is over Rs 100 per piece, and 5 percent if less than Rs 1000 per piece, and surgical masks have a GST of 5 percent.

Many opposition leaders, including former Congress President Rahul Gandhi have been demanding that PPE be exempted from GST.

Tax officials pointed out that being a value add tax, GST was collected at each stage of supply chain tax. So even if even if GST on PPE was reduced to zero, the total cost would remain unchanged as the tax would have already been collected along the chain of inputs by the time it came to the final producer. Even assuming GST exemption to PPE, it would only make output GST as zero, but the input tax credit (GST paid on inputs) would get blocked and so would get added to the cost.

So the consumer would not gain from GST exemption, and at the same time, the compliance burden would increase for manufacturer, as he would be required to maintain separate account of inputs, input services and capital goods used for manufacture of PPE (exempted items).

However imports would not suffer from any blocked input tax credit, and so would be cheaper than PPE produced domestically, the officials said. This would then hurt domestic producers, they said.