Page 22 - GSTL_13th August 2020_Vol 39_Part 2

J30 GST LAW TIMES [ Vol. 39
Heading 3004 : Medicaments (excluding goods of Heading 30.02, 30.05 or
30.06) consisting of mixed or unmixed products for therapeutic or prophylac-
tic uses, put up in measured doses (including those in the form of transder-
mal administration systems) or in forms or packings for retail sale, including
Ayurvaedic, Unani, homoeopathic siddha or Bio-chemic systems medica-
ments, put up for retail sale.
Heading 3808 : Insecticides, rodenticides, fungicides, herbicides, anti-
sprouting products and plant-growth regulators, disinfectants and similar
products, put up in forms or packings for retail sale or as preparations or arti-
cles (for example, sulphurtreate bands, wicks and candles, and fly-papers).
Having come to know that some manufacturers of “Hand Sanitizers (Alcohol
based)” are wrongly classifying the said item under Tariff Heading 3004 (12% GST)
whereas the said item is liable to be classified under Tariff Heading 3808 (18%
GST), Revenue Authorities (Director General of GST Intelligence) have started in-
vestigation into the huge tax evasion going on due to lower taxes being paid on
hand sanitizers. There is a specific direction to all Revenue Authorities that mis-
classification of hand sanitizers manufactured/supplied by sugar facto-
ries/distilleries may be verified in order to plug any revenue leakages. It is esti-
mated that tax evasion may be over ` 50 crores. DG-GSTI has already initiated the
investigation.
Many companies dealing in alcohol-based hand sanitizers are classifying
the same under Tariff Heading 3004 (12% GST) of HSN whereas the same are
correctly classifiable under Heading 3808 (18% GST) of HSN. Thus, the misclassi-
fication of ‘Hand sanitizers (Alcohol based)’ appears to have resulted in substan-
tial evasion of GST.
Government’s view point
As clarified by Ministry of Finance by Press Release dated 15-7-2020, the
GST rates on various items are decided by the GST Council where the Central
Government and all the State Governments jointly decisions. Sanitizers are disin-
fectants like soaps, anti-bacterial liquids, dettol, etc. which all attract duty stand-
ard rate of 18% under the GST regime. Inputs for manufacture of hand sanitizers
are chemicals packing material, input services, which also attract a GST rate of
18%. Reducing the GST rate on sanitizers and other similar items would lead to
an inverted duty structure and put the domestic manufacturers at disadvantage
vis-à-vis importers. Lower GST rates help imports by making them cheaper
which is against the nation’s policy on Atmanirbhar Bharat. Consumers would
also eventually not benefit from the lower GST rate if domestic manufacturing
suffers on account of inverted duty structure. Therefore, hand sanitizers attract
GST at the rate of 18%.
_______

GST LAW TIMES  13th August 2020  22