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IDMA urges finance ministry to clarify on GST rate on hand-sanitizers and alcohol-based hand-rubs
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Peethaambaran Kunnathoor, Chennai
September 15 , 2020
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The pharmaceutical companies manufacturing hand-sanitizers and alcohol-based hand-rubs (ABHR), after obtaining drug licences from various state drugs control departments, are being forced by the GST Intelligence wing to pay 18% GST for the products which, the manufacturers claim, are classified as drugs and covered under HSN code 3004 with a tariff rate of 12%.
In a communication to Nirmala Sitharaman, the union finance minister and chairman of the GST council, the Indian Drug Manufacturers’ Association (IDMA) has petitioned that the officials of the GST Intelligence wing in Chennai, Pondicherry and other parts of the country orally want them to pay GST at a rate of 18% claiming that the products fall under the HSN code 3808 which attracts 18% GST.
The association wanted urgent clarification from the finance minister on the applicability of GST rate, whether it is 12% or 18%, for hand sanitizers and ABHR. Further they sought the clarity of the HSN code under which the products are covered.
The IDMA, the premier association of drug makers in the country, went on to say that the offices of the GST Intelligence wing are issuing summons to the sanitizer makers and putting tremendous pressure on them to make the payment at 18% saying that the products are classified as ‘disinfectants’ and not as ‘medicament’ to attract a lower rate of 12%. The drug makers informed the minister that the departmental officials are of the view that hand sanitizers fall under chapter 3808 and it attracts 18% GST.
While briefing Pharmabiz about their grievances due to the regulatory challenges that they face during this pandemic situation, sources from the industry sector said hand sanitizers are manufactured under drug licences, hence they are medicament. The letter sent to Nirmala Sitharaman says that hand sanitizers contain pharmaceutical ingredients which have therapeutic and prophylactic properties. Further, the label of the product appears with the claim that the product ‘kills germs’ which means that the product is meant for medicinal purpose and not for cosmetic application. The product contains curative and preventive ingredients.
When contacted the Commissioner of the Central Board of Indirect Taxes and Customs (CBIC) in Chennai, N Padmashri the Commissioner said as per government norms, the sanitizers have been classified into three categories, normal sanitizer, medical grade sanitizer and sanitizer disinfectant.
The first one (normal) comes under the HSN code 3402 2090 and 18% GST is charged. The second one (medical grade) falls under the GST tariff of 12% and its HSN code is 3004 9099. Third classification (disinfectant) is also charged a GST at a rate of 18% and it is the one that comes under the category of 3808 9400.
From the explanation of the Commissioner it is learnt that 18% GST is charged only for disinfectants and for the normal sanitizers. But sanitizers classified as ‘medicament’ are charged only 12%. IDMA’s complaint to the finance minister is that the drug manufacturers in the country are manufacturing sanitizers under drug licences and the ingredients are having therapeutic and prophylactic properties, so the products come under the drug category and the applicability of GST is only 12%.
When asked about the alleged oral threat of GST Intelligence Wing to sanitizer makers asking for 18% GST, the Commissioner said she did not have any information on that hence unable to comment on it.
To ensure whether sanitizers come under medicament or disinfectant, M Sivabalan, the director of drugs control in Chennai, said manufacturing licence for sanitizers are given under drug category, so it comes under medicament.
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