New Delhi:
The government on Wednesday said sanitizers are disinfectants like soaps, anti-bacterial liquids, dettol, among others, which attract 18 per cent duty under the GST regime. In a statement, the Finance Ministry said various chemicals, packing materials and input services, among others, used for manufacturing hand sanitizers also attract a GST rate of 18 per cent.
“Sanitizers are disinfectants like soaps, anti-bacterial liquids, dettol, etc., which all attract duty standard rate of 18 per cent under the GST regime,” it said. Reducing the GST rate on sanitizers and other similar items would lead to an inverted duty structure and put domestic manufacturers at a disadvantage vis-a-vis importers of hand sanitizers, the ministry said.
Explaining the rationale, it further said that lowering GST rates would make importing sanitizers cheaper as domestic industry would be at a disadvantage if raw materials are taxed at higher rate than the end product. “Lower GST rates help imports by making them cheaper. This is against the nation’s policy on ‘Atmanirbhar Bharat’. Consumers would also eventually not benefit from the lower GST rate if domestic manufacturing suffers on account of inverted duty structure,” it added.
The Goa bench of Authority for Advance Ruling (AAR) had recently ruled that alcohol-based hand sanitizers will attract 18 per cent duty under GST. Although the Ministry of Consumer Affairs has classified hand sanitizers as an essential commodity, the GST law has a separate list of exempted goods, the authority had said.
However, the government has removed hand sanitizers from the purview of Essential Commodities Act, 1955 as there is sufficient supply, Consumer Affairs Secretary Leena Nandan said on July 7. EY Tax Partner Abhishek Jain said this is a classic classification dispute that is whether hand sanitizers should be classified as “disinfectant” which attracts a GST rate of 18 per cent or hand sanitizers should be classified as a “medicament” which attracts GST rate of 12 per cent. “The government has clearly provided their view that hand sanitizers are disinfectants and would attract 18 per cent GST. Now, it is for the industry to accept the view of the government or if they disagree then litigate it before the courts,” Jain added.
