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GST Tax rate on Sanitary Napkins, Products – Whisper, Stayfree to attract 12% under GST

By Paras Mehra

( 14.5K Views) July 11, 2017

GST Tax rate on Whisper, Stayfree is 12% - Govt Notifies

Introduction

Finally after a long haul, the government comes up with the final verdict and finalizes the tax rate on sanitary napkins at 12% via press release. Earlier, there were many discussions going on with the government to make the sanitary napkins tax free under GST. However, government said that it has already reduced the tax incidence on the sanitary napkins from existing 13.68% to 12%.

It further states that due to removal of cascading effect the price of sanitary napkins shall further come down.

GST Tax rate on raw materials used for Sanitary Napkins

Government also notified the GST rate for raw materials used for Sanitary napkins. The major lists of raw materials are as follows:

Super absorbent polymer (18%)
Poly Ethylene Film (18%)
Glue (18%)
LLDPE – packing cover (18%)

Here is the list of material taxed at 12% GST rate

Thermo bonded non-woven (12%)
Release paper (12%)
Wood Pulp (12%)

Reason for keeping the GST tax rate 12% and not nil

As a raw materials for manufacture of sanitary napkins attract GST of 18% of 12%, even with 12% GST on sanitary napkins, there in an inversion in the GST structure.

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 dis-advantage vis-à-vis imports, which will also attract 12% 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% to 5%, it will further accentuate the tax inversion and result in even higher accumulated ITC, with correspondingly higher finanical costs on account of fund blockage and associated administrative cost of refunds, putting domestic manufacturers at even greater dis-advantage 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 dis-advantage vis-à-vis imports, which will be zero rated.