Ministry of Finance vide Press Release dated July 15, 2020, has issued a clarification on the issue of GST Rate on Alcohol-based Hand Sanitisers.
This clarification seeks to declutter the matters surrounding the “Alcohol-Based Hand Sanitisers” since many representations seeking exemption under GST for hand sanitisers being classified as essential goods in the wake of COVID-19 pandemic have been filed.
This clarification has decisively put to rest the rumours about the applicability of GST on hand sanitisers.
Recently, AAR Ruling by the Hon’ble Goa Authority for Advance Ruling in the case of In re Springfields (India) Distilleries dated June 29, 2020, has held that a rate of 18% will be levied on “Alcohol-Based Hand Sanitisers” under HSN Code 3808 and are accordingly taxable at the appropriate rate as per schedule entry notified vide Notification No. 1 Central Tax (Rate) dated June 28, 2017. However, the limitation of the applicability of AAR Ruling had still made the issue unresolved for the industry as a whole.
Thus, with this clarification, it is clear that the “Alcohol-Based Hand Sanitisers” shall be liable at the rate of 18% under the GST regime. The sanitisers are disinfectants like soap, anti-bacterial liquids, Dettol etc. all of which attract a standard duty rate of 18% under GST regime.
It also clarified that the inputs used for manufacturing of the hand sanitisers are chemical packing material, input services; they also attract a GST rate of 18%. This would result in an inverted duty structure and put the domestic manufacturers at a disadvantage vis-a-vis importer.
In conclusion, the Ministry of Finance's clarification on the GST rate for alcohol-based hand sanitizers has put to rest the confusion surrounding the issue. The clarification confirms that hand sanitizers will be subject to an 18% GST rate, bringing them in line with similar disinfectant products. However, this decision creates an inverted duty structure, putting domestic manufacturers at a disadvantage compared to importers.
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