Govt says GST on sanitary pads actually lower than pre-GST era

The government said, "Sanitary napkins are classifiable under heading 9619. In pre-GST, they attractedconcessional 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."

Screen grab from Indian actress, Shenaz Treasurywala's video petition to remove tax on sanitary pads. Image Source: Youtube

After coming under fire from various quarters for taxing women's essential products -- sanitary pads -- at 12% GST, the government on Monday clarified its position.

GST is Goods and Services Tax that came into force from July 1, 2017 trying to tie India into one nation, one tax thread.

The government said, "Sanitary napkins are classifiable under heading 9619. In pre-GST, they attractedconcessional 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."

It further said, "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, the government explained.

"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," the statement said.

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