Sanitary Napkins & India: A GST journey

While menstruation remains more or less a social stigma to talk about, one thing has managed to break the silence a little. Goods & Services Tax (GST) gained a lot of attention, for a lot of reasons, one of them being the tax rates on sanitary napkins. When it was first announced, the 12% GST on pads raised concerns from social activists who saw it as an attack on menstrual hygiene. With the government slashing down taxes on sanitary napkins after almost a year of protest, let’s look at some of the points you might have missed:

The before & after

Before the introduction of GST, sanitary napkins used to come under indirect taxation. The total tax incidence, after taking into consideration different duties and concessions, amounted to 13.68%. When sanitary napkins were put under the GST umbrella, the final tax rate was kept at 12%. The 1.7% decline, although negligible, was largely ignored by the protestors. The reason being, while items like sindoor, bindi etc had been exempted from the tax system, sanitary napkins were not.

The government, on 21st of July 2018, announced a cut on the tax rates of 88 items. Piyush Goyal, the Indian Finance Minister, informed the public that sanitary napkins have now been completely exempted from GST. The decision spread a wave of celebration among people who had been protesting against the taxation since the past one year.

A reality check

The GST exemption is being seen as a major victory by the people. However, for those expecting a slashing in prices, there might be some disappointment in store. As the earlier finance minister, Arun Jaitley pointed out, a GST exemption is more complicated than just the keywords. For beginners, whether a good is under “0% taxation”, or “exempted” under GST makes a lot of difference.

Under GST, tax is imposed on multiple stages. So, a domestic brand producing sanitary napkins would have to pay input tax (for the raw material), as well as tax on the final product. The input tax is reimbursable, but only if GST is being charged on the final product. The rules clearly state that goods exempted under GST are not to be considered for ITC (Input Tax Credit). In practise, this means that while the domestic producers will still pay the input tax, they wouldn’t get the tax credit back, since the final output is now exempted from GST.

Had sanitary napkins still been subjected to GST, even if at a negligible rate, the producers would be entitled to a reimbursement on input tax. Since the cost to the producers will not reduce, at least not by a significant margin, there is a strong possibility that prices might not drop down at all. Some people have even speculated that prices could rise instead, coming as a move by the producers to keep their profits intact.

Conclusion

Whether or not the GST exemption will result in a price cut is still uncertain. However, it is clear that this is not a solution to the menstrual hygiene issue we have been facing. Even in the best case scenario, the prices will be cut down by a very small proportion. For people seeing this as a grand victory, it is only one in metaphors. India is still in a condition of plight over menstrual hygiene. According to a report by the NGO, Dasra, about 23 million school girls drop out every year simply because of a lack (or absence) of basic sanitary facilities. Majority of the households still do not talk about menstruation, except in hushed whispers. Our country needs more than public pleasing policies to bring a firm change.

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Sanitary Napkins & India: A GST journey
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Sanitary Napkins & India: A GST journey
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The GST on sanitary napkins has been on a rollercoaster ride since the beginning. With the tax now entirely exempted, let’s have a look at the implications.
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