Last Saturday Finance Minister Piyush Goyal declared that sanitary napkins will be fully relieved from Goods and Services Tax (GST), as compared with the existing 12 percent tax; it is a decision that is expected to make the product cheaper and affordable for women. It is good news for all the protestors who willingly protested against the taxation of the menstrual hygiene products as well as the consumers are also happy to avail these products at a cheap rate.
But on the other hand the manufacturers are having an opposite emotion because according to the government has taken a very right step by removing the GST and 12 percent tax but this will be causing problems to the manufacturers because the raw materials for the sanitary napkins that they purchase will impose the same 12 percent tax for which now the manufacturers will not be able to claim the “Input Tax Credit” from the government.
It is because a manufacturer has pay tax at every stage of the product until the final stage of the product. The benefit of GST is that the government pays the entire tax it has collected or the raw materials provided the manufacturer pays the final tax. But now as the final tax is removed by the government the manufacturer will not be able to claim the “Input Tax Credit” from the government, so the manufacturers demanded that if the GST could be reduced to 5 percent from 12 percent it would have helped them.
The ministry said if the GST rate on sanitary napkins were reduced from 12 percent to 5 percent, it will further fluctuate the tax inversion and result in even higher accumulation of ITC, and higher financial costs on account of fund blockage and associated higher administrative cost of refunds, which will put domestic manufacturers in great disadvantages.