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% and 5%
VAT and, the pre-GST estimated total tax incidence on sanitary napkins was
13.68%. Therefore, 12% GST rate had been provided for sanitary napkin.
Major raw materials for manufacture of sanitary napkins and
applicable GST rates on them are as under:
a) 18% GST
rate
o Super Absorbent Polymer
o Poly Ethylene Film
o Glue
o LLDPE– Packing Cover
b) 12% GST
rate
o Thermo Bonded Non-woven
o Release Paper
o Wood Pulp
As raw materials for manufacture of sanitary napkins attract GST
of 18% of 12%, even with 12% GST on sanitary napkins, there in an inversion in
the GST structure. Though, within the existing GST law such accumulated ITC
will be refunded, it will have associated financial costs [interest burden] and
administrative cost, putting them at a dis-advantage vis-à-vis imports, which
will also attract 12% IGST on their imports, with no additional financial costs
on account of fund blockage and associated administrative cost of refunds.
If the GST rate on sanitary napkins were to be reduced from
12% to 5%, it will further accentuate the tax inversion and result in even
higher accumulated ITC, with correspondingly higher finical costs on account of
fund blockage and associated administrative cost of refunds, putting domestic
manufacturers at even greater dis-advantage vis-à-vis imports.
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. This will make domestically manufactured
sanitary napkins at a huge dis-advantage vis-à-vis imports, which will be zero
rated.
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DSM/SS/KA
