GST rate on alcohol-based hand sanitisers

With the onset of the pandemic COVID-19, the hand sanitiser market is currently seeing a boom. The number of producers producing hand sanitisers has increased in tandem with the significant increase in demand. Aside from the rising demand and quantity of manufacturers, the GST implications on hand sanitiser are also a hot topic.

GST rate on alcohol-based hand sanitizers

For the first time, the Authority of Advance Ruling in Goa looked into the matter and determined that alcohol-based hand sanitizers are subject to 18 percent GST. The increased GST rates sparked a massive outcry in the market. The Ministry of Finance published a press release on June 15, 2020, outlining the GST and attempting to justify the increased GST rate in order to settle the situation.

The subject of this article is the aforementioned Advance ruling, as well as the accompanying press release issued in the matter.

Advance Ruling on the matter

The question of levying GST on hand sanitisers was recently addressed by the Authority of Advance Ruling, Goa in the matter of Springfields (India) Distilleries. Hand Sanitizers are covered under HSN 30049087, according to the applicant, and will be subject to a 12 per cent GST.

The advance ruling authority reached the following conclusion based on the submission and personal hearing:

  • Hand sanitizers containing alcohol are classified as HSN 3808 and are subject to an 18 percent GST.
  • The Ministry of Consumer Affairs has designated hand sanitisers as an essential commodity. However, simply designating products as essential commodities will not be sufficient to exempt the commodity/good from GST.

Applicable GST Rate

In a press statement dated July 15, 2020, the government clarified the applicable GST rate in light of a recent Advance Ruling Judgment and increasing demand for hand sanitiser as a result of the COVID-19 epidemic.

According to the definition, hand sanitisers are disinfectants such as antibacterial liquids, Dettol, soaps, and other similar products. As a result, the same will be subject to GST at the rate of 18%.

GST rate on alcohol-based hand sanitizers

Higher GST Rate

The government has provided the following justifications in support of levying GST at an 18% rate on hand sanitisers, according to the press release:

  • According to the government, hand sanitisers require inputs such as chemicals, packing material, and other components, therefore lowering the GST rate will inevitably result in an “inverted duty structure.” The 18 percent GST applies to the above-mentioned inputs and additional input services utilized in the manufacture of hand sanitisers.
  • If the GST rate on the final product, i.e., hand sanitiser, is reduced, an ‘inverted duty structure’ will ensue. In the end, the domestic producer will lose money due to the inverted tariff structure.
  • Reduced GST rates would encourage more imports- The government has also stated that lowering the GST rate on hand sanitiser would make imports cheaper. Because of the lower price, more vendors will be enticed to import hand sanitiser rather than compete in the Indian market. This will clearly contradict the government’s Atmanirbhar Bharat policy.