After facing flak from various quarters about the decision to levy a whopping 18% Goods and Services Tax (GST) on Alcohol-based hand sanitizers amid COVID-19 pandemic, the Finance Ministry has defended the move in a "clarification" statement.
The ministry said since sanitizers are disinfectants like soaps, anti-bacterial liquids, dettol etc, they attract duty standard rate of 18 percent under the current GST regime.
"The GST rates on various items are decided by the GST Council where the central government and all the state governments together deliberate and take decisions," read the statement.
The ministry also added that inputs for the manufacturing of hand sanitizers are chemicals packing material which also attract a GST rate of 18 percent.
“Reducing the GST rate on sanitizers and other similar items would lead to an inverted duty structure and put the domestic manufacturers at disadvantage vis-a-vis importers. Lower GST rates help imports by making them cheaper.”Ministry of Finance
As per the government, lowering the GST rate is against the nation’s policy on Atmanirbhar Bharat, stating that the consumers would not benefit from the lower GST rate if domestic manufacturing suffers on account of inverted duty structure.
What Was AAR's Ruling?
The ruling from the Authority for Advance Ruling (AAR) came in the case of Springfield India Distilleries, which had approached the Goa bench of AAR regarding the classification of hand sanitizers supplied by the company, and its contention was that a 12 percent GST levy is attracted on hand sanitizers, IANS had reported.
The company had also sought to know if sanitizers would be exempt from GST since it is now an essential commodity.
The Goa bench of AAR, in its ruling, said that since hand sanitizers manufactured by the company are of the category of 'alcohol-based hand sanitizers', an 18 percent GST would be applicable.
The authority further said that although the Ministry of Consumer Affairs has classified hand sanitizers as an essential commodity, the GST law has a separate list of exempted goods.
Following AAR' ruling, many had argued that sanitizers are an essential commodity during COVID-19 pandemic, and thus, should not not attract high GST.
(With inputs from IANS)
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