Tax Management India. Com
                        Law and Practice: A Digital eBook ...
TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 
Discussions Forum
Home Forum Goods and Services Tax - GST This
A Public Forum.
Anyone can participate to share knowledge.
We acknowledge the contributions of Experts/ Authors.

Submit new Issue / Query

← Previous Next →

GST rate on Hand sanitizer, Goods and Services Tax - GST

Issue Id: - 116174
Dated: 30-3-2020
By:- KARAN VERMA
GST rate on Hand sanitizer

  • Contents

Sir

What is HSN code and GST rate on Hand Sanitizer.

Post Reply

Posts / Replies

Showing Replies 1 to 15 of 21 Records

1 Dated: 30-3-2020
By:- KASTURI SETHI

HSN 3808 94 00. GST Rate @18% vide Notification No.1/17-CT(R) dated 28.6.17 (as amended up to 30.12.19) at serial no.87.


2 Dated: 30-3-2020
By:- KARAN VERMA

Sir

Many pharmaceutical companies sold this under HSN 30049087 and gst rate 18%.


3 Dated: 30-3-2020
By:- KARAN VERMA

Sorry, gst rate 12% and Hsn code 30049087- antibacterial formulation.

They said this is not disinfectant like Harpic.


4 Dated: 30-3-2020
By:- KASTURI SETHI

Sanitizer also acts as disinfectant. For determination of classification of any product we are not to resort to nomenclature only. There are so many factors to be considered e.g function and end-use, ingredients of the product, whether it is covered under specific entry in tariff or under the category of 'others' or 'Not elsewhere specified'. Only the factor of 'known in common parlance' would not suffice. In such a scenario, it is safer to opt for AAR.


5 Dated: 30-3-2020
By:- Ganeshan Kalyani

I agree with Sri Kasturi Sir's reply. It is not easy to determine the HSN for a product. It includes the correct understanding of the ingredient of the product, its use etc. It is better you approach advance ruling.


6 Dated: 1-4-2020
By:- Sumit Srivastava

I hold in high esteem the experts who have by their replies and articles enriched the knowledge and lives of lesser mortals like me.

In the present case, my two cents go thus -

+ The queryist seeks the correct classification of "Hand sanitizer". While appreciating the thin line demarcating the qualities of a sanitizer/disinfectant, nevertheless, bearing in mind that a leap from the classification under HSN code 3004 9087 to 3808 9400 would fetch higher revenue to the government by way of a higher rate of tax (12% & 18% respectively) and which, in all probability, the Authority for Advance Ruling would certainly endorse (as is observed from the litany of orders reported by TMI), I, for one, would hold back the manufacturer from knocking the doors of the AAR and land in an abyss.

+ Be that as it may, googling about the words "sanitizers and disinfectants" leads one to answers which the mind has questions about (thanks to the Artificial Intelligence (AI) capabilities of Google) and provides answers aplenty. Some of the links I would like to share with discerning readers are https://www.nycoproducts.com/resources/blog/whats-the-difference-between-sanitizers-and-disinfectants/

and

http://www.uschemical.com/wp-content/uploads/2016/04/L000207_SANITATION_VS_DIS.pdf

+ Suffice to say that in the context in which the query arose in the mind of the queryist, what with all the earthlings talking about COVID-19, I feel that what answers to "T" the question is - Sanitizers are only used on food contact surfaces & Disinfectants are generally not used on food contact surfaces, unless they have specific labeling instructions to be used as a sanitizer.

+. The "sanitizer" which the queryist refers to is "Hand sanitizer".

+ Apart from the other distinguishing features that differentiate between a "sanitizer" and "disinfectant", methinks that the Hand Sanitizer, classification of the same, is verily ensconced under the heading 3004 9087 and would attract lesser rate of GST as indicated by the queryist.

In fact, in these turbulent times, "Hand sanitizers" which, in any case, have disappeared from the store shelves or online platforms should be exempted or charged to NIL rate of tax, if not already, whether the classification ultimately decided by the authorities concerned, goes the Chapter 30 way or the Chapter 38 highway.

I hope the learned experts, whose writings, I am always impressed with, continue to share their wisdom on this platform for many more years to come.

Thanks for bearing with my longish reply.


7 Dated: 1-4-2020
By:- KASTURI SETHI

Dear Sumit Srivastava,

I am all praise for your art of drafting. Before posting my reply I have gone through all the literature available on this issue. It is not correct that AAR decides the issue of classification in favour of Govt. AAR decision has no precedent value, however, this can be used as persuasive tool. I agree to the extent that there is a thin difference between the two. Opting for AAR means saving oneself from possibility of interest & penalty. You are saved from rigours of litigation and it is a fact that nobody likes litigation. In sanitizer, dominant ingredient is disinfectant and Disinfectant has a specific entry. Sanitizer and disinfectant both kill germs and virus. Alcohal is major ingredient used as disinfectant in sanitizer. Any classification is decided, inter alia, on the basis of major constituent in any product. Function, usage, marketability, nomenclature in trade parlance etc.are also other factors to be dwelt upon.

We express our views in the interest of the visitors of TMI Website. Final decision is to be taken by the concerned manufacturer. The querist does not depend upon only one site.The querists visit so many platforms/sites before arriving at any conclusion. Nobody should jump at conclusion.


8 Dated: 2-4-2020
By:- KASTURI SETHI

Dear Sumit Srivastava Ji,

You have triggered me to study further on the issue. In this context, a few judgments of Hon'ble Supreme Court/CESTAT/CEGAT are worth-reading and worth-following which are as under:-

1. "Classification - Principles - Basic character, function and use more important than name used in trade parlance - Rules of Interpretation of Tariff applicable only if determination of classification according to terms of headings and relative section or chapter notes not possible. [para 3]" Reported as 2008 (231) ELT 207 (SC) = 2008 (9) TMI 66 - SUPREME COURT in the case of CCE Vs. International Tobacco.

2. "End use to be considered if classification is related to function of goods." Reported as 1986 (24) ELT 325 (CEGAT) = 1985 (10) TMI 195 - CEGAT, NEW DELHI in the case of Union Carbide Vs. CCE, Collector Customs, Bombay.

3."HSN and Rules of interpretation override trade parlance." Reported as 2005 180 ELT (300) (SC) = 2005 (2) TMI 114 - SUPREME COURT in the case of O.K.Play (India) Vs. CCE, Delhi-III, Gurgaon.

4. "If the legislature has adopted a technical term, then that technical term has to be understood in the technical sense and not on the basis of market parlance". Reported as 1997(93) ELT 646 (SC) = 1997 (7) TMI 652 - SUPREME COURT in the case of Reliance Cellulose Products Ltd. Vs.CCE.

5. "If the tariff entry is used in a scientific or technical sense or when there is a conflict between entries in the tariff, common parlance will not prevail. "Technical meaning prevails. Reported as 1990 (47) ELT 161 (SC) = 1990 (2) TMI 50 - SUPREME COURT in the case of Akbar Badruddin Jiwani Vs.Collector Customs.

6. Last but not least and it is very very important from the assessee's point of view and that is "The burden of proof of classification is on the department" reported as 2005 (179) ELT 17 = 2004 (12) TMI 92 - SUPREME COURT (SC-3 Member Bench in the case of Vicco Laboratories Vs. CCE, Nagpur. .


9 Dated: 3-4-2020
By:- Kashish Gupta

Dear Experts,

I would like to add on my points related to this query. These are as under:

1. It is well settled that the words used in tariff shall be presumed to be of popular sense. The absurdity of adopting the technical meanings over “common parlance” in fiscal statutes was highlighted by the Hon'ble Supreme Court in Reliance Cellulose Products Ltd. Hyderabad v. Collector of Central Excise, Hyderabad-I Division, Hyderabad reported at (1997) 6 SCC 464 = 1997 (7) TMI 652 - SUPREME COURT by holding as under:

  • “20. In other words, if the word used in a fiscal statute is understood in common parlance or in the commercial world in a particular sense, it must be taken that the Excise Act has used that word in the commonly understood sense. That sense cannot be taken away by attributing a technical meaning to the word. But if the legislature itself has adopted a technical term, then that technical term has to be understood in the technical sense. In other words, if in the fiscal statute, the article in question falls within the ambit of a technical term used under a particular entry, then that article cannot be taken away from that entry and placed under the residuary entry on the pretext that the article, even though it comes within the ambit of the technical term used in a particular entry, has acquired some other meaning in market parlance. For example, if a type of explosive (RDX) is known in the market as Kala Sabun by a section of the people who uses these explosives, the manufacturer or importer of these explosives cannot claim that the explosives must be classified as soap and not as explosive.”

2. Similarly, the Hon'ble Supreme Court in Shree Baidyanath Ayurved Bhavan Ltd. v. Collector of Central Excise, Nagpur, reported at (1996) 9 SCC 402 = 1995 (3) TMI 109 - SUPREME COURT applied the common parlance test to classify the product “Dant Lal Manjan”, which was in issue. The Hon'ble Supreme Court held that “Dant Lal Manjan” did not qualify as a medicament under the Central Excise Act, by setting forth the following reasons:

  • “3. … The Tribunal rightly points out that in interpreting statutes like the Excise Act the primary object of which is to raise revenue and for which purpose various products are differently classified, resort should not be had to the scientific and technical meaning of the terms and expressions used but to their popular meaning, that is to say the meaning attached to them by those using the product. It is for this reason that the Tribunal came to the conclusion that scientific and technical meanings would not advance the case of the appellants if the same runs counter to how the product is understood in popular parlance."

3. The twin test method (Twin test of common parlance and the ingredients contained in the product) evolved by the Hon'ble Supreme Court was applied to determine the classification of a product as a cosmetic or medicament in Puma Ayurvedic Herbal (P) Ltd. v. Commissioner, Central Excise, Nagpur, reported at (2006) 3 SCC 266 = 2006 (3) TMI 141 - SUPREME COURT.

  • “2. … In order to determine whether a product is a cosmetic or a medicament a twin test has found favour with the courts. The test has approval of this Court also vide CCE v. Richardson Hindustan Ltd. [(2004) 9 SCC 156] = 1989 (1) TMI 352 - SC ORDER There is no dispute about this as even the Revenue accepts that the test is determinative for the issue involved. The tests are:
    • I. Whether the item is commonly understood as a medicament which is called the common parlance test. For this test it will have to be seen whether in common parlance the item is accepted as a medicament. If a product falls in the category of medicament it will not be an item of common use. A user will use it only for treating a particular ailment and will stop its use after the ailment is cured. The approach of the consumer towards the product is very material. One may buy any of the ordinary soaps available in the market. But if one has a skin problem, he may have to buy a medicated soap. Such a soap will not be an ordinary cosmetic. It will be medicament falling in Chapter 30 of the Tariff Act.
    • II. Are the ingredients used in the product mentioned in the authoritative textbooks on Ayurveda?”

4. The essential character of the medicine and the primary function of the medicine is derived from the active ingredients contained therein and it has certainly a bearing on the determination of classification. As held in Amrutanjan case [Amrutanjan Ltd. v. CCE, (1996) 9 SCC 413 : (1995) 77 ELT 500] = 1995 (3) TMI 97 - SUPREME COURT, the mere fact that the ingredients are purified or added with some preservatives does not really alter their character.”

5. Since for buying a hand sanitizer, no medical prescription is required, it should not be scientifically interpreted. The public at large accepts it as a normal sanitizer which kills the germs and does not render an ailment to a specific disease. Anyone can use it in their routine life. Hence, the classification therefore can very well be made under Chapter 30.


10 Dated: 4-4-2020
By:- KASTURI SETHI

Nicely analyzed the judgements. I want to say 'prescription' does not come into picture here.


11 Dated: 4-4-2020
By:- KARAN VERMA

Thanks kashish ji for such detailed explanation.


12 Dated: 5-4-2020
By:- CSSANJAY MALHOTRA

Killing germs can't be the sole criteria as there are various products which kills germs but still find place in Chapter 38 as disinfectant also kill germs. Chapter 30 is for Pharma products.

Do review Chapter 3402 also for sake of knowledge and review why same is not best suited for Hand sanitisers as same has multiple use i.e. kiling germs and cleaning hands.

CBIC in any case may come out with clarifications in due course. One will find judgements across all chapters 30, 34, 38 but can't be made blindly applicable to one's product. Use of product sometimes is specified on label also. Ingredients for manufacture of Hand sanitisers varies in most of cases, that is also need to be looked at.


13 Dated: 5-4-2020
By:- KASTURI SETHI

Sh.CS Sanjay Malhotra Ji, Sir, Thanks for throwing light on the issue.


14 Dated: 6-4-2020
By:- KASTURI SETHI

I have received a message via WhatsApp from a registered taxpayer to clarify why there are two different rates of GST in respect of sanitizers. I am nobody to clarify. I am no authority. The taxpayers should either approach Board or Advance Ruling Authority for this purpose. Thus they will be able to avoid rigours of litigation.


15 Dated: 10-4-2020
By:- SYED RIZVI

Sir ,

A manufacturer engaged in Cosmetic items, has just got a license for the first time in view of Covid-19 crisis to make good the shortage of Hand Sanitizer in market . Now tell me shouldn't this be treated and fall under essential item and no GST or at most 5% be charged thereon. What is the position as on date .Please enlighten


1

Post Reply

← Previous Next →

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Site Map - Recent || Site Map || ||