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GST-free sanitary napkins? Manufacturers say it’s a misnomer

In a report on July 10, 2017, FM Arun Jaitley had declared, “Reducing the GST rate on sanitary napkins to nil will result in complete denial of input tax credit to domestic manufacturers of sanitary napkins and zero rating imports.”

Makers of niche products like organic and biodegradable pads feel GST waiver will not help them or even consumers

“So many people lobbied behind the government in the past year, it is good to see that they listened to the public,” says Nisha Bains of Purganics, an organic sanitary pad company. Yet Mumbai-based Bains, who hails the decision of the government to exempt the 12% tax charged on sanitary napkins on behalf of consumers, calls it a partial move.

“What exactly is GST-free? Are the raw materials GST-free? Are the imports GST-free? It should be probed further,” she says, urging the government to see both sides of the coin, for consumers as well as the manufacturers. While activists and mass manufacturers rejoice, many a local manufacturer like Bains are still paying the input tax for all the raw materials, as well as imports, that go into the making of their niche products, which include environment-friendly and biodegradable napkins.

Another Mumbai-based startup, Saral Designs, which provides end-to-end solutions in the space of menstrual hygiene, feels the lack of input tax credit (that was covered by the government until now) will affect the Indian ecosystem of local manufacturers as they will have to spend more towards increasing the access to sanitary napkins. “The GST exemption will benefit importers of sanitary pads more than local manufacturers,” feels Kartik Mehta, co-founder, Saral Designs.

What Mehta means is that once it gets cheaper to import pads rather than manufacture them, Indian companies such as his might lose out on business to foreign imports.”This may even leave the market flooded with Chinese or other low-cost imports, going against the ‘Make in India’ policy, especially for SMEs,” he says.

Moreover, even though output tax has been waived, input tax remains the same for the manufacturer. So to keep margins intact, they will be able to reduce costs of the napkins only nominally and not the 12% expected by the consumer.

To the government’s credit, in a report on July 10, 2017, FM Arun Jaitley had declared, “Reducing the GST rate on sanitary napkins to nil will result in complete denial of input tax credit to domestic manufacturers of sanitary napkins and zero rating imports.” The report went on to specify how such a step will put domestically manufactured sanitary napkins at a huge disadvantage vis-à-vis imports, which will be zero rated.

So how can the government back up this tax exemption now? As per Amar Tulsiyan, a social entrepreneur who works towards menstrual hygiene and awareness, the government should back up their ‘first step’ by ensuring that local manufacturers do not suffer. “My recommendation to the government is to relax import taxes and duties on raw materials, as well as spend on awareness , as even if manufacturers make pads, someone has to break the taboo,” he feels. The social entrepreneur adds that this conversation is crucial because as many as 25-27 crore women in India still do not use sanitary napkins.

“The female workforce of India cannot afford to miss out on five days of work a month,” he says. The solution, he believes, is widespread awareness and availability of sanitary products. “With the GST exemption there will be an ‘ease of doing business’ for local entrepreneurs (as they will not have to register for a GST certification). Hence, women in rural India can be enabled to participate in door-to-door sales, increasing access for even the remotest areas,” he suggests.

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