Scrapping GST on sanitary pads may not aid local makers

Imports of the product will become cheaper

The Union government’s decision to scrap goods and services tax (GST) on sanitary napkins is unlikely to result in a proportionate reduction in costs, according to an expert.

While imports would benefit from zero GST on the product, domestic manufacturers would suffer a huge disadvantage vis-à-vis imports as it would result in the complete denial of input tax credit, leading to an increase in the procurement cost.

Mr. R Muralidharan, senior director, Deloitte India believes that the reduction of GST from 12% to 5% would have actually helped the industry.

“Ideally, reduction of GST to 5% tax could have helped the companies to recover the part of the input tax credit. “But by making it zero, imported items would become cheaper as the input tax credit will be added to the cost of the domestic manufacturers.

Nominal tax

“A nominal tax is always better when the input tax credit is higher,” he told The Hindu.

The GST Council, at its meeting held on July 21, recommended various changes in GST rates on goods and services as well as in the policy. One such key decision was scrapping GST on sanitary napkins.

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