There are some demands in lieu of the exemption of GST on Masks, Ventilators, PPEs from various sectors. Putting these items in GST Exemption List will lead to the blocking/denial of ITC, which will further increase the cost of products. Because the GST ITC is not allowed if the output tax is not there. The output Tax is fully adjustable against the GST Paid on inputs used for manufacturing or trading of these items.
Currently, Ventilators attract the GST @ 12% and PPE attracts the GST @ 5% if the cost per piece is up to Rs. 1000/- and @ 12% if the cost per piece of PPE is more than Rs. 1000/-.
Sources said that while consumers will not gain from the GST Exemption on these items, although the burden of compliance will increase on the manufacturers. On putting these items on Exemption List, the manufacturers are required to maintain separate accounts to reverse the ITC paid on inputs used for these items.
Earlier this month, the government has already exempted basic customs duty and health cess on these items (except sanitizer) till 30.09.2020. Although the elimination of customs duty may have been detrimental to domestic manufacturing, it was done to meet the immediate need of such goods to deal with the COVID-19 pandemic, considering that domestic supply may not have been sufficient to meet the increased requirement.
Source: The Economic Times