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After a day of confusion and minor panic about the affordability of alcohol-based hand sanitisers, the government issued a ‘clarification’ justifying the 18 percent GST. Instead of taking the opportunity to assure people that the increase in GST will not impact retail prices of alcohol-based sanitisers, the Ministry of Finance, in an official statement said, “Sanitisers are disinfectants like soaps, antibacterial liquids, dettol etc. which all attract a duty standard rate of 18% under the GST regime.”
Alcohol-based hand sanitisers have emerged as a life saver for many who are out on the frontlines of the ‘war’ against Covid-19, or do not have access to water to wash their hands. While this was no doubt a disappointment for those hoping for a roll-back on the increase in GST, the government also missed the opportunity to allay people’s fears and thus score political brownie points by clarifying that an increase in GST would not cause an increase in the retail price of the product.
Instead, the government justified the higher GST slab saying, “Inputs for manufacture of hand sanitizers are chemicals, packing material, input services, which also attract a GST rate of 18%. Reducing the GST rate on sanitisers and other similar items would lead to an inverted duty structure and put the domestic manufacturers at disadvantage vis-a-vis importers.” A lower GST rate will “help imports by making them cheaper” it stated, adding that this was “against the nation’s policy on Atmanirbhar Bharat.”
The statement said that consumers would “also eventually not benefit from the lower GST rate if domestic manufacturing suffers on account of inverted duty structure.” According to the government, “Hand sanitisers attract GST at the rate of 18 percent.” These tax slabs are “decided by the GST Council where the Central Government and all the state governments together deliberate and take decisions.”
Central Board of Indirect Taxes & Customs, responsible for administering Indirect Taxes in India Ministry of Finance, Government of India, also posted the Ministry’s press not on social media.
Press Note – Clarification on GST Rate on Hand Sanitizers. pic.twitter.com/jZZQUkqUOi
— CBIC (@cbic_india) July 15, 2020
Earlier this week, the Authority for Advance Ruling (AAR) has ordered that 18 per cent GST will be levied on all alcohol-based hand sanitisers. A company named Springfield India Distilleries had approached the Goa-bench of AAR to seek classification of hand sanitisers supplied by the company, and contended that the product is taxed at 12 percent. It also wanted to know if sanitisers are exempt from GST since it is now an essential commodity. Apart from the 18 percent GST, the AAR, in its ruling, said that even though the Ministry of Consumer Affairs has classified hand sanitisers as an essential commodity, the GST law has a separate list of exempted goods.
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