Should Covid-19 vaccine be taxed? Here’s what may advocate for its tax exemptionDecember 22, 2020
On 30 January 2020, the World Health Organisation (WHO) declared that the outbreak of novel coronavirus (2019-nCoV) constituted a ‘Public Health Emergency of International Concern’ (PHEIC). On 11 March 2020, the WHO characterized the novel coronavirus disease (COVID-19) as a pandemic. The COVID-19 pandemic left a drastic impact on every segment of life and changed the way we conduct business, operate, and interact. The pandemic set off a wave of unprecedented and difficult times sustained by virtual business proceedings and social distancing. As the world remains gripped with fear of COVID-19 claiming millions of lives, we are expectantly looking at the Medical fraternity to be a savior.
Headways and Hurdles in Vaccine Development
This is probably the first time in history that a vaccine would be developed in such a short period of time, and it seems like we are not too far from getting more than one vaccine to fight against this dreadful virus. In India, the Government is keenly reviewing the progress of vaccine development/manufacturing and working on a wide vaccination plan as Serum Institute of India and Bharat Biotech seek emergency approvals. Hon’ble Prime Minister’s visit to Serum Institute of India, Bharat Biotech, and Zydus Biotech Park underlines the gravity of the situation. At the world stage, Sputnik V is already being administered to doctors, soldiers, teachers, and social workers within Russia, while Pfizer/BioNTech’s vaccine is undergoing trials.
It will be a mammoth task for the Indian Government, medical fraternity, and supply chain to have the vaccine developed in record time and to have it administered to a population close to 1.35 billion. Apart from this, there a blind spot – the efficacy of the vaccines developed in India and abroad. Be as it may, the Government’s objective to administer the vaccine across the nation at an affordable cost coincides with the exemption of taxes and duties applicable to the vaccine.
Currently, the import of COVID-19 vaccine (including bulk) falls under Chapter Heading 3002 is exigible to a Customs duty of approximately 16.50%, which includes basic Customs duty of 10%, social welfare surcharge of 10%, and IGST of 5%. Given that different sets of people may respond differently to the vaccines, we may have to depend on all the above vaccines basis their availability. Such a levy of Customs duty could result in an increase in the cost of vaccines and, in turn, contradict the measures being taken by the Government to prevent the widespread of the pandemic. This certainly cannot be the Government’s intention, especially when a few months ago, exemption from Customs duty and health cess was allowed to ventilators, face and surgical masks, PPE and COVID-19 testing kits along with inputs required for manufacturing these items. Thus, it appears to be a miss that needs to be corrected sooner rather than later.
The COVID-19 vaccine merits exemption on the following grounds:
- Levy of Customs duty on COVID-19 vaccines and bulk will become costlier for Governments (as Central and State Governments/Organisations are likely to procure the same) and the public in general.
- As the primary objective is to deliver low-cost health-saving vaccines and drugs, it may be expedient to immediately grant exemption from Customs duty as well as GST in respect of import/supply of COVID-19 vaccines, including bulk.
- Moreover, one of the benchmarks for the Government to determine the vaccine candidates is cost along with efficacy. Hence, absorbing Customs duty/GST could prove detrimental vis-à-vis the objective of providing a low-cost vaccine for mass vaccination.
- Also, India’s National Health Mission strives to provide accessible, affordable, and quality health care to the rural population. Thus, it is imperative to mitigate the adverse impact of duties and taxes on COVID-19 vaccines, including bulk.
- Further, it may be pertinent to note that presently, the import of freely supplied medicines/drugs/vaccines by UNICEF, Red Cross, or an International Organization does not attract Customs duty subject to the condition of furnishing a certificate to the effect that such imported medicines/drugs/vaccines are supplied by UNICEF, Red Cross or an International Organization and are required for Central Government/State Government sponsored immunization program, and actual use for said purpose.
- Similarly, across the world, an exemption to medicines, medical equipment, etc., is being provided to fight COVID-19.
- This relief may also be in line with the Government’s Intensified Mission Indradhanush 2.0, which aims at ensuring full immunization with all available vaccines for children and women in the country. It is only a matter of time when this Mission would be extended to cover new diseases like COVID-19, and the vaccination thereto would be distributed free of cost. In such a case, a levy of Customs duty/GST will be an additional cost to the Government.
Further, as a step towards ‘Make in India,’ ‘Atmanirbhar Bharat Abhiyan,’ ‘Vocal for Local’ initiatives as well as the mission to fight the pandemic, the Government can consider extending Customs duty exemption to COVID-19 vaccine (including bulk) when supplied from SEZ unit into DTA, in case an exemption is not preferable to an imported vaccine.
Thus, it is imperative that the Customs duty, including IGST, applicable on COVID-19 vaccines be brought to zero/be exempted either when imported into India or when procured from SEZs to make the same more affordable and accessible to the public. This will be a crucial move to halt the rapid spread of the pandemic, which has already affected over 72.3 million worldwide and 9.88 million in India, with an increasing death toll of approximately 1.61 million worldwide and 0.14 million in India!
Saket Patawari is Executive Director at Nexdigm (formerly SKP). Views expressed are the author’s personal.