Page 56 - GSTL_23rd July 2020_Vol 38_Part 4

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Alcohol-based hand sanitizers to attract 18% GST, rules
AAR

Amid the ongoing debate over Goods and Services Tax (GST) rate on
hand sanitizers, the Goa Bench of the GST Authority of Advance Ruling (AAR)
has held that the alcohol-based hygiene product will attract 18 per cent GST. It
added that its classification as an essential commodity cannot be a criteria 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 classi-
fied hand sanitizers as essential commodity.
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 Bench ruled that, “Hand sanitizers manufactured by the applicant are
of the category of alcohol-based sanitizers and are classifiable under Heading
3808 of the Harmonised System of Nomenclature (HSN) to which the rate of GST
applicable is 18 per cent.” Regarding the second query, the AAR said that there is
a separate notification under GST law for exempted goods and services. “Merely
classifying any goods as an essential commodity will not be the criteria for ex-
empting such goods from GST.”
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 ‘me-
dicament’, it was felt GST officials have said several manufacturers and suppli-
ers, including sugar mills and distilleries, are classifying alcohol-based hand san-
itizers under the Tariff Heading 3004 with 12 per cent tax against 3808 of HSN,
which attracts 18 per cent GST.
Abhishek Jain, Tax Partner, EY, said the ruling is aligned to the view tak-
en by GST Authorities that 18 per cent be applicable to hand sanitizers. “The
classification of hand sanitizers has been a matter of debate since inception, espe-
cially given the multiple entries in which it could warrant classification because
of its composition and uses.” He said given its significance during the pandemic
and with multiple players manufacturing this product, the Centre should con-
GST LAW TIMES  23rd July 2020  56