Govt issues clarification on GST rate for sanitary napkins

Sanitary napkins are classifiable under heading 9619. Major raw materials used for manufacturing sanitary napkins such as super absorbent polymer, poly ethylene film, glue and LLDPE packing cover attract 18 per cent GST, while thermo bonded nonwoven, release paper and wood pulp attrct GST of 12 per cent.

As raw materials for manufacture of sanitary napkins attract GST of 18 per cent and 12 per cent, there in an inversion in the GST structure, even with 12 per cent GST on sanitary napkins. 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 disadvantage vis-à-vis imports, which will also attract 12 per cent 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 per cent to 5 per cent, 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 disadvantage 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 disadvantage vis-à-vis imports, which will be zero rated. (KD)

Fibre2Fashion News Desk – India