The 28th GST Council meeting gave the women across the country a reason to rejoice by scrapping GST on sanitary napkins. Additionally, rakhi was also made GST free just prior to the Indian festival Raksha Bandhan. Other common goods like handmade carpets, footwear, TV sets, paints and refrigerators were also saw reduced GST rates. Furthermore, household articles like broomsticks, vacuum cleaners, grinders and juicers also saw GST reduction.
The GST rate on sanitary napkins used to be 12% which has now reduced to nil. The government took a positive step forward by asking the product manufacturers to transfer the complete benefit to end user. Social media appreciated the finance minister’s move and was filled with people thanking the government. But the question is, does the abolishment of GST really affect the end price of the product?
GST exemption: A blessing in disguise?
When one hears about the GST Exemption from sanitary napkins, the logical brain would find it to be a very positive step. No doubt it will reduce the overall cost of the product making it more affordable. However, does the lower/nil GST necessarily mean the end consumer price will always be reduced? The answer is, not always. The fixed tax cost in the manufacturing of the product is not affected by reduction of output tax rate.
So, while the final GST rate has been abolished, other units used in manufacturing of the product such as the polythene film and glue draws an 18% GST rate. Additionally, there is a 12% GST rate on other materials like release paper and wood pulp. Therefore, even after the GST on sanitary pads has been reduced to nil, it doesn’t necessarily reduce the end price of the product to a desired amount. Moreover, local manufacturers might not be able to acquire imports especially from China in the absence of output GST.
How people react
A Delhi resident Neha Mathur is relieved by the GST exemption.
“Finally the tax from sanitary pads has been removed. Girls will not have to drop out of schools due to menstruation. Campaigning and educating people about menstrual hygiene has been a great step in the past year. With the release of the movie, Pad-man, people have started to be more open in their outlook towards menstrual hygiene. If not anything, people must take away one thing that it is not a choice. Hence, sanitary tools shall not be taxed.” says Neha.
“Although, the Indian manufacturers might suffer the loss while paying the input and the output taxes while foreign companies will not be much affected. But overall, even the consideration of such a step is thoughtful to respect the importance of women in the nation. They will not have to lose their lives to diseases, infections and can go to school to pursue higher education. More and more women from rural areas will get higher education and stable jobs which will add up to the economy. No matter big or small, this is a delighting step in the name of feminism.” adds Neha
It must be noted that the government issued Press Release explained the logic behind the 12% GST application on sanitary napkins. The 10th July, 2017 dated Press Release reported, “Reducing the GST rate on sanitary napkins to nil, will however, result in complete denial of ITC to domestic manufacturers of sanitary napkins and zero rating imports. This will make domestically manufactured sanitary napkins at a huge disadvantage vis-à-vis imports, which will be zero rated.”
Only time can tell whether this decision is a boon or a bane but the consideration sure must be appreciated.