Page 57 - GSTL_23rd July 2020_Vol 38_Part 4

2020 ] NEWS DESK J115
sider issuing an explicit clarification to control unwarranted litigation on this
aspect.
[Source : Business Standard, New Delhi, dated 15-7-2020]

Government defends 18% GST on alcohol-based sanitisers,
says a lower rate may affect domestic production
Reacting to criticism against 18% GST rate on alcohol-based sanitisers,
the Government on 15-7-2020 said that a lower rate on the product would lead to
inverted duty structure, which would put the domestic manufacturers at a dis-
advantage vis-à-vis importers of hand sanitisers.
Inverted duty structure refers to incidence of higher taxes on inputs than
on the final products.
The Government further said that consumers would also eventually not
benefit from the lower GST rate if domestic manufacturing suffers. “The GST
rates on various items are decided by the GST Council where the Central Gov-
ernment and all the State Governments together deliberate and take decisions,” it
added.
Correction of inverted duty structure has been at the top of GST Council
agenda for the last few meeting. In March, the Council had decided to raise the
GST rate on mobile phones to 18% from 12% citing inverted duty structure,
which provided an edge to imported phones. The Council has also been deliber-
ating hiking rates on a bunch of items including textiles, footwear, fertilisers,
tractors and renewable energy devices as they suffer form the same anomaly.
Inverted duty structure means that businesses cannot exhaust all the in-
put tax credit accumulated on account of paying taxes on inputs if their output
tax liability is lower. The Government has estimated that it refunds ` 20,000 crore
annually to these manufacturers annually in lieu of their unutilised ITC.
Separately, as FE reported earlier, hand sanitiser manufacturing has at-
tracted the GST investigation as some firms are found to have been using an in-
correct Harmonised System of Nomenclature (HSN) for the product leading to a
loss of at least ` 50 crore to the exchequer since the launch of GST.
The initial intelligence developed by Central Economic Intelligence Bu-
reau (CEIB) pointed out the fraud saying that many sugar mills and distilleries
are mis-classifying hand sanitisers under the HSN Code 3004 instead of the 3808.
The GST rate is 12% for items under the former code and 18% for the latter.
Experts said that while mis-classification of products to avail lower rate
is used by unscrupulous businesses often, the surge in sale of hand sanitisers
since March due to the COVID-19 pandemic attracted profiteers in large num-
bers.
However, some suppliers continue to sell the product domestically at a
lower rate. Items under HSN Code 3004 attract 12% GST and are called
‘medicaments’ consisting of products for therapeutic or prophylactic uses to be
administered in dosage. But HSN Code 3808 covers items like insecticide, fungi-
cide and disinfectants like hand sanitisers, and attract 18% GST.
[Source : Financial Express, New Delhi, dated 16-7-2020]
GST LAW TIMES  23rd July 2020  57