‘Tax incidence on sanitary napkins is lesser post GST’

Rujuta Parekh
Monday, 17 July 2017

“There are some remarks made by various column writers on GST rate on sanitary napkins. It may be mentioned that the tax incidence on this item before and after GST is the same or less. Sanitary napkins are classifiable under heading 9619."

PUNE: While there has been an outcry over the issue of levy of 12 per cent Goods and Services Tax (GST) on sanitary napkins, Union Human Resource Development Minister Prakash Javadekar clarified on Saturday, that the tax incidence on sanitary napkins has in fact dropped. 

Refuting claims that sanitary napkins will become more expensive, during an interaction with trade associations from Pune in the city on Saturday, Javadekar said that the tax incidence on sanitary napkins has reduced from about 14.5 per cent to 12 per cent. 

In a press release issued by the Central Board for Excise and Customs recently, it is stated that, “There are some remarks made by various column writers on GST rate on sanitary napkins. It may be mentioned that the tax incidence on this item before and after GST is the same or less. Sanitary napkins are classifiable under heading 9619. In pre-GST, they attracted concessional excise duty of 6 per cent and 5 per cent Value Added Tax and the pre-GST estimated total tax incidence on sanitary napkins was 13.68 per cent. Therefore, 12 per cent GST rate had been provided for sanitary napkins.”

The release goes on to explain that if the tax incidence on sanitary napkins is reduced, it will have a negative impact on domestic manufacturers of sanitary napkins. 

“As raw materials for manufacture of sanitary napkins attract GST of 18 per cent or 12 per cent, and even with 12 per cent GST on sanitary napkins, there is an inversion in the GST structure. Though, within the existing GST law such accumulated Input Tax Credit (ITC) will be refunded, it will have associated financial costs (interest burden) and administrative cost, putting them at a disadvantage vis-à-vis imports, which will attract 12 per cent IGST but no additional financial costs,” the press release states. 

Speaking on the issue, activist fighting for zero per cent GST on sanitary napkins, Pravin Nikam said, “Previously, the tax rate on the product was about 6 per cent across India, while VAT was only applied to a handful of states. This means that the tax rate for few states has actually gone up from 6 per cent to 12 per cent, making the napkin expensive post GST. As far as Maharashtra is concerned, the tax rate has come down, as previously, the VAT amounted to 6 per cent over the excise, but that is not the case for other states, which attracted a much lower tax rate. GST still says sanitary napkins are luxury and not an essential commodity.”

DISADVANTAGE TO DOMESTIC MANUFACTURERS
- The release further stated that if the GST rate on sanitary napkins were to be reduced from 12 per cent to 5 per cent, it will further accentuate the tax inversion and result in even higher accumulated ITC, leading to fund blockage and higher costs, giving imported products an advantage. 
- “Reducing the GST rate on sanitary napkins to nil, will however, result in complete denial of ITC to domestic manufacturers of sanitary napkins and zero rating imports (non-taxed imports). This will make domestically manufactured sanitary napkins at a huge disadvantage vis-à-vis imports, as they will be zero rated,” the press release explained.

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