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The High Court of Punjab and Haryana has expressed ‘hope’ that the GST Council will take a call on the tax rates for hand sanitisers.
According to the Finance Ministry, hand sanitisers, classified among soaps and anti-bacterial liquids, attract 18 per cent GST, the standard rate. Various chemicals, packing materials and input services used in the manufacture of hand sanitisers also attract a GST rate of 18 per cent. A rate lower than that would lead to an inverted duty structure and put the domestic manufacturers at a disadvantage vis-à-vis importers of hand sanitisers, it is believed.
But, can alcohol-based hand sanitisers and Ayurvedic/Unani/Siddha (AUS) ingredients-based sanitisers be treated on par?
The Haryana Ayurvedic Drugs Manufacturers Association had approached the High Court, challenging show cause notices issued by GST department to the manufacturers of ‘AUS ingredients-based sanitisers’, directing them to deposit GST at the rate of 18 per cent instead of 12 per cent.
The GST tariff list has listed Ayurvedic, Unani, Homeopathic, Siddha and biochemical systems medicaments under the 12 per cent category while disinfectants and similar products are in the 18 per cent category.
The Association pleaded that AUS-based hand sanitisers are different from alcohol-based ones and should be brought under the 12 per cent bracket. They submitted a representation in February to the GST department for clarification. However, no action has been taken till date.
Counsel for the Tax Department informed the court that representation, if already submitted, shall be forwarded to the GST Council. “It is hoped that the same shall be taken up for consideration by the Council at the earliest, considering the issue involved,” said the court.
Tax evasion allegations
The GST department has initiated a probe into alleged tax evasion by alcohol-based hand sanitiser manufacturers. It has made a list of 62 manufacturers who are allegedly involved in this practice. According to sources, many manufacturers and suppliers, including sugar mills and distilleries, are classifying alcohol-based hand sanitisers under tariff heading 3004 (GST rate 12 per cent) while actually it should be under tariff heading 3808 (GST rate 18 per cent) of the Harmonised System of Nomenclature (HSN).
The Goa Bench of the GST Authority for Advance Rulings (AAR) had earlier ruled that alcohol-based hand sanitisers attract a GST of 18 per cent. There, the applicant had said that hand sanitisers come under the category of antibacterial formulations and accordingly the rate should be 12 per cent.
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