Exemption of GST for COVID related drugs – Is it logical?

There is lots of voice on exemption of GST on drugs and vaccinations related to COVID. Is it really required?

The Central Government has right to turn down requests to exempt Covid related drugs and vaccines produced domestically from Good and Service Act. Vaccine attracts 5% GST and drugs attracts 12% GST.

GST is payable on value addition in the production chain as manufactures can claim credit for all the axes paid on input services. If manufactures cant setoff input taxes which they have paid on buying input material which will be used fir final product, it will result to recover these taxes from consumer.

Thus, it make sense to retain GST on drugs and vaccine, as unclaimed input tax credit could, in the absence of levy on the final product, cumulate in the retail price.

Credit to Economictimes