A thread for those who are wondering why 5% GST on Vaccines:

GST is levied on the Selling price. This GST is collected by the seller. The seller may have paid GST (to his vendor) while making purchases of raw materials/services. This GST paid on purchases is available(1/n)

as a setoff against the GST collected on Sales. The net GST is to be deposited with the Govt at the end of each month(generally).

The same is available as refund if the difference is negative or can be carried forward to next period for setoff.(2/n)

However, if the product is exempted from GST, then as per the GST laws or general indirect principles, the GST paid on purchases made in relation to such exempt product will not be available for setoff (Setoff available only when product is taxable). (3/n)

For eg, if I purchase Rs.50 worth of Raw Materials and pay GST of 12% on the same, I end up paying Rs.56. After doing some processing, I make a final product from this and decide it to sell at Rs.100.
(4/n)

If GST is 5%:
Customer will pay Rs.105. I will collect GST of Rs.5 and setoff GST paid on purchase of raw materials, ie Rs.5 - Rs.6 = Re. 1 of Refund due to me from government. My profit here is 50+1(refund)=Rs51.
(5/n)

If no GST / exempt:
I am not going to get the setoff of GST paid on purchases, so I have to load it to the cost. Revised selling price = 100+6,ie Rs106. My profit here is Rs.50. If I have to maintain profits at par then I would have to further increase the price to Rs.107.
(6/n)

The real challenge here is that there is no one to one earmarking possible to indentify which raw materials used / common costs incurred and how much GST was paid on it. Majority of expenses incurred are common in nature and hence may also trigger a common GST disallowance
(7/n)

basis the ratio of taxable turnover : exempt turnover. In current financial year, vaccine producers would have majority of sales from Covid vaccine and if made exempt, almost all GST paid by them would be loaded to cost unnecessarily (because setoff not available)
(8/n)

The above is a theoretical explanation, however, lets also look at practical scenario.

Currently, GOI has announced free vaccines for all above age of 45 at Govt facilities. So it is indeed the govt who is paying for the GST and going to get this GST back as well.
(9/n)

Most state governments have announced free vaccine too for 18-44 age brackets.

So it not really the common man who is going to pay this 5% GST so to say.

Who will be impacted by this 5 % GST?
Typically, none among underprivileged for sure.
(10/n)

Those who wish to get inoculated at private hospitals may be the ones who would be actually ending up paying that nominal 5% GST. This 5% GST for such people is not a concern, probably they have driven down to the vaccine centre in private vehicle burning Petrol of Rs.50.
(11/n)

Typically Rs.50 petrol has Rs.30 of taxes which is still more than the GST on Vaccines. Not to forget, the hospital would charge may be Rs.500 - Rs.1500 for a jab which such a person would happily pay and not cry for Rs.20-30 of GST on Vaccines.

Please spread awareness.
(n/n)