It cited protection of rights of domestic sanitary manufacturers as a reason for not exempting this necessary product from GST.
Mumbai: Reacting to widespread opposition to 12 per cent GST on sanitary napkins, the finance ministry on Monday said that the tax protects rights of manufacturers who are entitled to get input tax credit under the new indirect tax regime.
In a statement clarifying its move, the finance ministry said the GST rate of 12 per cent is lesser than the previous accumulative tax rate of 13.68 per cent.
“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,” it said in a statement.
Sanitary napkins, a basic necessity of women all over the world have always attracted taxes in India. Its taxation under the newly rolled out GST regime, has fostered disapproving reactions from people. Women from all over the country have taken to various forms of campaigning, on social media or otherwise to protest the taxation of this necessary item.
The finance ministry gave a break-up of the GST rate incurred by manufacturers while making sanitary napkins.
18% GST rate
Super Absorbent Polymer
12% GST rate
Thermo Bonded Non-woven
Poly Ethylene Film
LLDPE– Packing Cover
It went on to say that traders can claim 18 per cent of 12 per cent GST as input tax credit. The traders will face major financial burden if sanitary napkins are placed under 5 per cent GST.
The ministry claimed that there is already ‘inversion in the GST structure’ with traders incurring more taxes than consumers. “If the GST rate on sanitary napkins were to be reduced from 12% to 5%, it will further accentuate the tax inversion…(it will mean) 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,” read the ministry statement.
It cited the protection of the rights of domestic sanitary manufacturers as a reason for not exempting this necessary product from GST. They will suffer heavily if that happens as input tax credit cannot be claimed for exempted products. “This will make domestically manufactured sanitary napkins at a huge dis-advantage vis-à-vis imports”, it said.