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GST rate on alcohol-based hand sanitizers

GST rate on alcohol-based hand sanitizers

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 15th 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.

Post by poonamgandhi

CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.

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