The ruling came in the case of Springfield India Distilleries which had approached the Goa bench of AAR to seek classification of hand sanitisers supplied by the company.

Hand sanitiser being used on palm
Money GST Wednesday, July 15, 2020 - 08:25

Goods and Services Tax (GST) of 18% will be levied on alcohol based hand sanitisers, according to a ruling by Authority for Advance Ruling (AAR).

The ruling came in the case of Springfield India Distilleries which had approached the Goa bench of AAR to seek classification of hand sanitisers supplied by the company and its contention was that a 12% GST levy is attracted on the hand sanitiser.

The company also sought to know if sanitisers would be exempt from GST since it is now an essential commodity.

The Goa bench of AAR in its ruling, said since hand sanitisers manufactured by the company are of the category of 'alcohol-based hand sanitisers', an 18% GST would be applicable.

The authority further said that although the Ministry of Consumer Affairs has classified hand sanitisers as an essential commodity, the GST law has a separate list of exempted goods.

The ruling comes at a time when the GST administration is probing into the allegation that some manufacturers, including alcohol-based hand sanitiser makers, are indulging in tax evasion/non-payment of GST by misclassifying the product. 

Tax officials believe that many manufacturers and suppliers are categorising alcohol-based hand sanitiser under tariff heading 3004 whereas it should actually be under tariff heading 3808 of HSN (Harmonised System of Nomenclature). The GST rate on products under tariff heading 3004 is 12% while for those under 3808, it is 18%.

An official told The Hindu that misclassification appears to have resulted in substantial evasion of GST. 

Experts say that since it was classified as an essential commodity due to the COVID-19 pandemic and given that the pandemic is ongoing, the government will have to provide a clarification on the taxation of the product.

The AAR is consistent with the view taken by GST authorities as well of a rate of 18% being applicable on hand sanitisers.

With IANS inputs

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