Why revenue’s stand on GST rates on hand sanitisers is flawed

Why revenue’s stand on GST rates on hand sanitisers is flawed

Covid-19 times have created their own classification issues from an indirect taxation perspective; the Central Board of Indirect Taxes, Directorate General of Goods & Service Tax Intelligence (DGGSTI) and the Economic Intelligence Bureau (EIB) as well as the ministry of Ayush are all flummoxed by this. Hand sanitisers are now manufactured largely by two types of units: the ones that had converted their alcohol manufacturing capacity and the ones that got licences from Ayush, reporting ingredients as prescribed by recognised Ayurvedic texts. The latter’s product attracts a GST rate of 12% since it fulfilled the condition of being an Ayurvedic medicament falling under Tariff head 3004, while the other’s attracts 18% under the Tariff Head 3402.

EIB told the DGGSTI about the two different GST rates in the market, apparently without investigating the underlying cause. The DGGSTI concurred broadly with the EIB, but sent the intelligence to field units with a caution on investigating the matter.

On July 15, the finance ministry clarified that hand sanitisers are to be treated as a disinfectant, quite like soap, etc. The ministry press note stated that hand sanitisers attract an 18% GST rate. It further supported the rate classification with the proposition that a lesser rate will make the duty-structure inverse, and will neither make the country atmanirbhar nor benefit the consumer.