GST Exemption on Sanitary Napkins

The government has completely exempted sanitary pads from GST by charging a 0% tax rate on the sale of sanitary pads. This article highlights the consequences of exempting GST on sanitary pads and inverted tax structures.

Applicability of GST on sanitary napkins and inverted tax structure

The GST rate on the sale of sanitary napkins is zero. However, GST rates on raw materials used for the manufacture of sanitary napkins are as follows:

With 18% and 12% on inputs and 0% on the sale of sanitary napkins, leads to a situation where the rate of tax on inputs is more than the rate of tax on output supplies. This is referred to as an inverted tax structure in GST. The manufacturers can claim the refund of input taxes, but it would result in additional financial and administrative costs on the company’s part.

On the other hand, importers have an added advantage as they are charged only with customs duty instead of customs duty+GST. Thus, the exemption of GST on sanitary napkins has benefitted the importers and not the local manufacturers. So, even if the imported products lack quality, they can easily penetrate the market due to low costs.

Exemptions available for sanitary napkins

The GST rate on the sale of sanitary napkins was 12%. But, from 21st July 2018, the sale of sanitary napkins was exempted entirely. This was perceived as a major victory. But, the actual benefit to the consumers was very little. Exemption of output GST resulted in the denial of ITC to the manufacturers. Thus, with no difference in manufacturing cost, the manufacturers are not left with any price benefit which they can further pass down to the consumer. 

GST rates and HSN or SAC codes for sanitary napkins