The Feminine and Infant Hygiene Association (FIHA) is set to approach the government against the recent decision of GST Council to exempt sanitary napkins, citing unfair competitive advantage to importers and the possibility of domestic manufacturing turning uneconomical due to the denial of input tax credit.
The association, which represents industries engaged in the manufacturing of baby, clinical diapers and sanitary napkins, has companies such as Johnson & Johnson, P&G, Dima Products, Kimberly Clark, Soothe Healthcare, Unicharm, Saral Designs, Shekhani Industry, M.D. Hygiene, Kamal Healthcare, RGI Meditech, Bella Premier, Rohit Surfactant, Feminine & Infant Healthcare, Nobel Hygiene as its members, the association said.
“While it was well intended, this decision is unlikely to achieve the objective for which it was designed — to make this category more affordable to consumers. The exemption of the finished product of sanitary napkins from GST effectively denies input tax credit to companies manufacturing in India, as a result, in order to offset the loss, the companies will not be able to pass any significant benefit to the consumers,” it said.
The association said there are concerns that “this decision offers an unfair competitive advantage to importers which is contrary to the spirit of a level playing field”. “It will also make it uneconomical and difficult to continue supply to government contracts at existing rates,” it said.
The association has asked the government to come up with a solution to provide input tax credit to manufacturers. Manufacturers of exempted goods under GST are ineligible to take input tax credit.
On Saturday, the GST Council in its 28th meeting cut rates for about 88 items including exemption of the widely demanded sanitary napkins, which were so far taxed at 12 per cent. The rate cuts would become effective from Friday (July 27).
In July 2017, the government had defended the decision to not lower the GST rate of 12 per cent on sanitary napkins citing the high tax rates of 18 per cent and 12 per cent on the inputs. The government release had also said that “reducing the GST rate on sanitary napkins to nil will… result in complete denial of ITC to domestic manufacturers of sanitary napkins and zero rating imports. This will make domestically manufactured sanitary napkins at a huge disadvantage vis-à-vis imports, which will be zero rated.”