MAY 12, 2021

By Vijay Kumar

IT seems uninformed citizens are agitated that even covid vaccine and drugs are subject to GST. The Finance Minister Nirmala Sitharaman clarified in her tweets:

1. GST at rates varying from 5% (on vaccines), 12% (COVID drugs, oxygen concentrators) is applicable to domestic supplies and commercial import of these items.

2. If IGST Rs. 100 is collected on an item, Rs. 50 accrues to the Centre and the States each as CGST and SGST respectively. Further 41% of the CGST revenue is devolved to States. So out of a collection of Rs. 100, as much as Rs. 70.50 is the States' share.

3. If full exemption from GST were given, the domestic producers of these items would be unable to offset taxes paid on their inputs and input services and would pass these on to the end consumers by increasing their price.

4. COVID vaccines are being provided free of cost by the GoI to those who are 45 yrs of age & above and to all frontline workers. On Government supplies, GST is also paid by the Government.

5. From the GST collected on vaccine, half is earned by the Centre and the other half by the States. Further, 41% of Centre's collections also get devolved to the States.

6. So States end up receiving almost 70% of the total revenue collected from vaccines. In fact, a nominal 5% GST is in the interest of the domestic manufacturer of vaccine and in the interest of the citizens.

7. If full exemption from GST is given, vaccine manufacturers would not be able to offset their input taxes and would pass them on to the end consumer/citizen by increasing the price.

8. A 5% GST rate ensures that the manufacturer is able to utilise ITC and in case of overflow of ITC, claim refund. Hence exemption to vaccine from GST would be counterproductive without benefiting the consumer.

Maybe there is some repetition, which can happen in tweets, but the Finance Minister likes to convey that the GST is actually beneficial to all concerned, maybe except the consumer. How is the citizen bothered about who gets how much from the tax on the covid products that he pays?. It hurts him to pay GST even on Covid.

Going back a little, just three years ago there was a napkin agitation for GST exemption for sanitary napkins. Champions of the napkin movement were vociferous in their attack on the Modi Government on the unfair tax on sanitary napkins. There were a couple of writs in High Courts and one High Court is reported to have remarked, "why sanitary napkins are not exempt from the Goods and Services Tax, when items like bindis, sindoor and kajal were kept out of its ambit."

Mr. Arun Jaitley had explained in November 2017 that -  If you reduce the 12% tax rate on sanitary napkins, we won't have an Indian manufacturer left; the Indian market would be flooded with cheaper Chinese products and as a result, the Indian manufacturing sector would suffer greatly .

So, he was doing a favour to the Indian Industry by levying that 12% GST on sanitary napkins, which  lofty aim somehow went above the heads  of television anchors, women activists and some lawmakers.

The Government of India gave an official clarificatory explanation in a Press Note dated 10.07.2017 which stated:

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.

So, according to the Government's opinion in July 2017 and November 2017, a 5% GST on Sanitary Napkins would have been a disaster and a nil rate would have been a calamity.

Come July 2018 and this is what the Government said,

They didn't realise in July 2017 and November 2017 that nil rate on sanitary napkins would improve health & hygiene and empower women!

The Council's decision has been hailed as one of the best ever decisions the mighty Council has ever taken. The then Finance Minister Piyush Goyal declared that -

mothers and sisters will be very happy to hear that sanitary pads are now 100 percent exempt from tax .

Swati Maliwal of the Delhi Commission for Women tweeted, 

Centre displayed extreme arrogance by not exempting sanitary napkins from GST over past 1 year! Glad that finally GST Council has made this happen. When Bindis & Sindoor can be exempt from tax, why not pads - lack of which cause terrible suffering to girls and women .

Even before GST was launched, she had written to the Finance Minister,

Understandably, taxation of sanitary napkins which is a basic necessity, denies its access to many. It makes sanitary napkins unaffordable for millions of poor Indian women who end up using dangerous materials such as dirty cloth, straw and sand instead………..This one decision of the Union government shall positively impact and improve the health and hygiene of millions of women  ."

The then Goa Chief Minister Manohar Parikkar tweeted, 

A welcome decision to exempt sanitary napkins from GST at the 28th GST Council Meet chaired by Shri Piyush Goyal. An important step by Narendra Modi Govt. that is vital to the health and well-being of women and girls .

The then Rajasthan Chief Minister Vasundhara Raje tweeted, 

The landmark decision to exempt GST on Sanitary Napkins is another welcome amendment and a long standing demand of women across India. A reminder that the Modi Sarkaar stands with its people - a government of the people.

Union Minister Smriti Irani had equal praise, 

Thankful to GST Council and Minister PiyushGoyal for exempting Sanitary Napkins from GST; a welcome step towards encouraging menstrual hygiene among young girls and women.

What applies to sanitary napkins will apply with more force to Covid related goods. Hope we will soon get many tweets praising Madam Sitharaman and the Prime Minister for their vision in exempting covid related goods.

From our archives -

Everybody seems to know about GST - Film actress Kajol recently said,   "I don't think I have the financial expertise to discuss GST - of course like the many experts, she also had her opinion on GST on Sanitary Napkins - "after all, if rice and milk are taxed, why not napkins?"

Sanitary Napkins Exempted - Who benefits?   - If one goes by the news reports and social media comments, it would appear that the greatest happening in that greatest post-Independence taxation is the exemption announced for sanitary napkins.

Profiteering in supply of Sanitary Napkins - When the tax on sanitary napkins was removed, the then Finance Minister declared,   "I have already instructed the department which looks after anti profiteering to investigate to ensure that either the rates would have come down on July 1, 2017, or it should come down now. It cannot be that they have the cake and eat it too."

Until next week