On this page
- Impact of GST Exemption on Sanitary Pads and Inverted Tax Structure
- Understanding the GST Application on Sanitary Pads and the Inverted Tax System
- The Impact of Exempting Sanitary Napkins from GST
- Detailed GST Rates and HSN/SAC Codes for Sanitary Pads
- Frequently Asked Questions
- Are sanitary pads exempt from GST?
- What is the inverted duty problem here?
- Does the exemption always reduce the price?
- Can manufacturers claim a refund of the inverted ITC?
Sanitary napkins are exempt from GST, which sounds like pure relief for consumers. But because the raw materials used to make them are taxed, manufacturers face an inverted duty structure – they pay GST on inputs but cannot recover it as ITC on an exempt output. This guide explains the exemption and its unintended cost impact.
Impact of GST Exemption on Sanitary Pads and Inverted Tax Structure
The Indian government has fully removed the Goods and Services Tax (GST) on sanitary pads, implementing a zero percent tax on their sale. This document explores the effects of this GST exemption on sanitary pads, particularly focusing on the implications of an inverted tax structure.
Understanding the GST Application on Sanitary Pads and the Inverted Tax System
The GST rate for selling sanitary napkins is currently zero. However, the raw materials used in their production are subject to GST at varying rates:
| Description | GST rate |
|---|---|
| Super absorbent polymer | 18% |
| Polyethylene film | 18% |
| Glue | 18% |
| LLDPE- packing cover | 18% |
| Thermo bonded non-woven | 12% |
| Release paper | 12% |
| Wood pulp | 12% |
The difference in tax rates, where input materials are taxed at 12% or 18% but the final product’s sale is at 0%, establishes an inverted tax structure within the GST framework. Although manufacturers are eligible to claim refunds for input taxes, this process incurs extra financial and administrative expenses for their businesses. Conversely, importers gain a competitive edge since they are only liable for customs duty, rather than a combination of customs duty and GST. Therefore, the GST exemption on sanitary pads predominantly advantages importers over local producers. This scenario enables imported goods, which might not meet the same quality standards, to easily penetrate the market due to their lower pricing.
The Impact of Exempting Sanitary Napkins from GST
Initially, sanitary pads were taxed at a 12% GST rate. However, as of July 21, 2018, their sale became completely exempt from GST. While this decision was largely seen as a positive development, its tangible benefit to end-users was quite limited. The removal of GST on the output supply prevented manufacturers from claiming Input Tax Credit (ITC). Since manufacturing costs remained unchanged, producers had no financial incentive to reduce prices for consumers.
Detailed GST Rates and HSN/SAC Codes for Sanitary Pads
| HSN | Description | CGST | SGST | IGST |
|---|---|---|---|---|
| 96190010 96190020 | Sanitary towels, sanitary napkins, tampons | 0% | 0% | 0% |
Frequently Asked Questions
Are sanitary pads exempt from GST?
Yes, sanitary napkins are exempt from GST.
What is the inverted duty problem here?
Inputs are taxed while the finished product is exempt, so manufacturers cannot claim ITC on those inputs.
Does the exemption always reduce the price?
Not fully – the blocked ITC becomes a cost that can offset the benefit of exemption.
Can manufacturers claim a refund of the inverted ITC?
No, refund of inverted-duty ITC is not available when the output is exempt.