Gst Rate On Alcohol Based Hand Sanitizers

As per the current scenario, with the outbreak of pandemic COVID-19, the hand sanitizer market is in the blooming era. With the tremendous increase in demand, there is a corresponding increase in the number of manufacturers engaged in manufacturing hand sanitizers. Other than the over loading demand and increased number of manufacturers, the GST implication on hand sanitizer is also the talk of the town. The

Authority of Advance Ruling, Goa, for the first time dealt with the issue and concluded that alcohol-based hand sanitizers attract 18% GST. The higher GST rates created a huge cry in the market. In order to stabilize the situation, the Ministry of Finance issued a press release on 15th June 2020, clarifying the GST and tried to justify the higher GST rate. The current article deals with the said Advance ruling, and the subsequent press release issued in the matter.

Advance Ruling on the matter

Recently, the Authority of Advance Ruling, Goa in the matter of Springfields (India) Distilleries has covered the issue of levy of GST on hand sanitizers. The applicant submitted that the Hand Sanitizers are covered under HSN 30049087 and, accordingly, will be liable to 12% GST. Based on the submission and personal hearing, the advance ruling authority concluded as follows-

Alcohol-based hand sanitizers are classifiable under HSN 3808 and liable to 18% GST.
Hand sanitizers are classified as an essential commodity by the Ministry of Consumer Affairs. However, merely classifying the goods as an essential commodity will not be the criteria/ measure for exempting the commodity/ good from GST.

Applicable GST Rate

Due to the recent Advance Ruling Judgment and extended demand of hand sanitizer on account of COVID-19 pandemic, the Government eventually clarified the applicable GST rate vide the press release dated 15

th July 2020. As per the clarification, the hand sanitizer is basically disinfectants like anti-bacterial liquids, Dettol, soaps, etc. Hence the same will attract GST at the rate of 18%.

Higher GST Rate

Justifying the basis for levying GST at the rate of 18% on hand sanitizers, vide the press release, the Government has come up with the following arguments-

Reduction in the GST rate would undoubtedly result in ‘inverted duty structure’-

The Government argues that inputs like chemical, packing material, etc. are required for manufacturing the hand sanitizers. The stated inputs and other input services involved in manufacturing the hand sanitizers attract 18% GST. In case the GST rate of final product i.e., the hand sanitizer is reduced, the same will result in ‘inverted duty structure’. Ultimately, in view of the inverted duty structure, the domestic manufacturer would be at a loss.

Reduction in GST rate would promote more import-

Additionally, the Government has also argued that if the GST rate of hand sanitizer is reduced, the import will be cheaper. Due to the cheaper rate, more and more suppliers would be attracted to import the hand sanitizer rather than go for Indian market. The same will definitely go against the Atmanirbhar Bharat policy of Government.

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Frequently Asked Questions

Common questions about GST Rate on Alcohol Based Hand Sanitizers in India.

According to the Advance Ruling by the Authority of Advance Ruling, Goa, alcohol-based hand sanitizers are classified under HSN 3808 and attract 18% GST. The Government has justified this higher rate to avoid an inverted duty structure and prevent cheaper imports.

The Authority of Advance Ruling, Goa's judgment on classifying hand sanitizers under HSN 3808 and levying 18% GST created a huge outcry in the market. To address this situation and justify the higher GST rate, the Ministry of Finance issued a press release on 15th June 2020.

The Government has provided two main reasons for the 18% GST rate on hand sanitizers: (1) A lower rate would result in an inverted duty structure as inputs like chemicals and packaging materials attract 18% GST, and (2) A lower rate would promote more imports, going against the Atmanirbhar Bharat policy.

An inverted duty structure arises when the GST rate on inputs (like chemicals and packaging materials) is higher than the GST rate on the final product (hand sanitizer). If the GST rate on hand sanitizers is reduced, it would lead to an inverted duty structure, causing losses for domestic manufacturers.

The Government argues that if the GST rate on hand sanitizers is reduced, it would make imports cheaper. This could attract more suppliers to import hand sanitizers instead of manufacturing them in India, which goes against the Atmanirbhar Bharat (self-reliant India) policy promoted by the Government.

As per the Advance Ruling by the Authority of Advance Ruling, Goa, alcohol-based hand sanitizers are classified under the HSN code 3808 for GST purposes, attracting a rate of 18%.

No, the classification of hand sanitizers as an essential commodity by the Ministry of Consumer Affairs does not automatically exempt them from GST or determine their GST rate. The GST rate is determined based on the HSN code classification and other factors considered by the Government.

In the Advance Ruling case, the applicant (Springfields (India) Distilleries) submitted that hand sanitizers should be covered under HSN 30049087 and liable to 12% GST. However, the Authority ruled that alcohol-based hand sanitizers attract 18% GST under HSN 3808.

The article mentions that with the outbreak of the COVID-19 pandemic, the demand for hand sanitizers has tremendously increased, leading to a blooming era for the hand sanitizer market and an increase in the number of manufacturers engaged in producing hand sanitizers.

The Advance Ruling by the Authority of Advance Ruling, Goa, is significant as it is the first time the issue of GST levy on hand sanitizers has been dealt with. The ruling classifying alcohol-based hand sanitizers under HSN 3808 and levying 18% GST has been a matter of discussion and debate.