For local manufacturers who are supplying the free sanitary napkins to the Telangana state government, the GST exemption on the finished product has come as a setback.

Will GST cut affect Telanganas free sanitary napkin scheme
news GST Monday, July 30, 2018 - 19:24

The Telangana government's free sanitary scheme is set to be rolled out across the state, albeit after a three-year delay.  However, for local manufacturers who are supplying the free sanitary napkins to the Telangana state government, the GST exemption on the finished product has come as a setback.  

The removal of tax on sanitary napkins will not help the state government buy the napkins at cheaper rates, as manufacturers are likely to add the losses to the cost of the final product. 

In July, the GST council announced rate cuts on 88 products and as part of that announcement, the tax rate on sanitary napkins, which was earlier 12 per cent, was brought down to zero. 

“We will have to bear an additional Rs 30 lakh every month due to the GST exemption. This amount is the input tax we pay for buying seven different raw materials to make sanitary napkins,” said Ananth Kumar K, the founder and Chief Executive Officer of Adroit Molecules, India. Adroit Molecules is one of the suppliers of sanitary napkins for the Telangana and Union government schemes.  

Some of the raw materials used to make the sanitary napkins attract 18 per cent GST, he added. 

Manufacturers believe that the rate cut will not be beneficial since this additional cost which the manufacturer has to bear now will be passed on to the buyer. In this case, the Telangana government, when procuring the sanitary napkins will enjoy a cost reduction of perhaps 2 to 3 per cent. 

“It’s a myth that the rate cut will be beneficial. when you calculate by how much the sanitary napkin price will come down, the cost reduction will be minimal. We are recovering the additional cost from the buyer. Finally, when you calculate, the cost of sanitary napkins will come down to by just 2 to 3 per cent and nothing more,” said Kumar. 

The state government's scheme to provide free sanitary napkins for girls studying at government institutions was first announced in 2015 by the state's Education Minister, Kadiyam Srihari. Since then, the scheme has been rolled out partially in a few schools scattered across districts. 

“Three months-worth of supply of free sanitary napkins will be provided to each schoolgirl as part of this project. We will begin rollout of the project across the state in August after a formal announcement. The details of the scheme will be formally announced at a later time," an official with the Department of Health and Family Welfare told TNM on the condition of anonymity.