Alcohol based hand sanitizers to attract 18 per cent GST: AAR

New Delhi, July 15 (KNN) The Goa-bench of the GST-Authority for Advance Rulings (AAR) has ruled that Alcohol based hand sanitizers will attract a GST of 18 per cent. 

The bench asserted that its classification as an essential commodity cannot be a criterion for exemption from GST.

Springfields (India) Distilleries had moved Goa AAR over classification of the hand sanitizer and the applicable rate of GST. It also sought an opinion on whether it will be exempt from GST as the consumer affairs ministry has classified hand sanitizers as essential commodities.

The applicant was of the view that hand sanitizers are covered under the medicament category, and should be taxed at 12 per cent under GST. However, the AAR, the AAR, in its ruling, said since hand sanitisers manufactured by the applicant are of the category of ‘alcohol-based hand sanitisers’, 18 per cent GST would be applicable.

The AAR further said that there is a separate notification under GST law for exempted goods and services adding that “merely classifying any goods as an essential commodity will not be the criteria for exempting such goods from GS.”

The ruling comes at a time when the GST administration is investigating GST evasion by manufacturers of alcohol-based sanitizers. They are paying 12 per cent GST by wrongly classifying the item under a different heading of ‘medicament’, it was felt.

According to several, GST officials, several manufacturers and suppliers, including sugar mills and distilleries, are classifying alcohol-based hand sanitizers under the tariff heading 3004 with 12 per cent tax against 3808 of HSN, which attracts 18 per cent GST.

Recently, Laghu Udyog Bharti's (LUB)—Pharma Committee had alleged that Department of Goods and Services classifying alcohol-based hand sanitizers as 'disinfectants' to extract 18 per cent Goods and Services Tax (GST) from the present 12 per cent.

According to Dr Rajesh Gupta, All India Head LUB-Pharma Committee, alcohol-based hand sanitizers have always been classified as "Medicinal Preparation" being manufactured under drug license obtained under the Drug and Cosmetics Act 1940. After the introduction of GST in the country, the industries manufacturing this product under the Drug License began to pay GST at 12 per cent as alcohol-based hand sanitizers are classified as "Medicaments" under heading 3004 of the HSN classification.

''However, it is unfortunate that the Department of Goods and Services has of late started classifying "alcohol-based hand sanitizers" under HSN heading 3808 as "Disinfectants" in order to extract GST at the rate of 18 per cent from the manufacturing Industries,'' Gupta said.