The Goa Bench of the GST Advance Ruling Authority (AAR) has held that the alcohol-based hygiene drug would attract 18 per cent GST in the midst of the ongoing debate on the rate of goods and services tax (GST) on hand sanitizers. This added that its classification as a critical commodity can not be a GST exemption criterion. Springfields (India) Distilleries had moved Goa AAR over the hand sanitizer classification and the relevant GST limit. It also sought an opinion on whether it would be exempt from GST since the Ministry of Consumer Affairs classified hand sanitizers as essential commodities.

According to the claimant, hand sanitizers are protected by the group of medicines and should be taxed at 12% under GST. However, the AAR bench ruled that, “Hand sanitizers manufactured by the applicant belong to the category of alcohol-based sanitizers and are classifiable under heading 3808 of the Harmonized Nomenclature System (HSN) at which the applicable GST rate is 18 percent.

” Regarding the second query, the AAR stated that there is a separate notification for exempt goods and services under the GST Act. “The requirements for exempting these goods from GS would not be merely to identify certain goods as a critical commodity.”

The ruling comes at a time when the GST administration is investigating GST evasion by alcohol-based sanitizer manufacturers. We are charging 12 percent GST by incorrectly classifying the item under a separate ‘medicine’ label, it was thought. GST officials said several manufacturers and suppliers, including sugar mills and distilleries, identify alcohol-based hand sanitizers under tariff heading 3004 with a tax of 12 per cent against HSN 3808, which attracts 18 per cent GST.

Abhishek Jain, tax partner, EY, said the ruling was aligned with the GST authorities’ view that 18 per cent would apply to hand sanitizers. “The classification of hand sanitizers has been a matter of debate since its inception, especially given the multiple entries in which it could warrant classification due to its composition and uses.” Because of its relevance during the pandemic and with multiple players manufacturing this drug, the Center should consider issuing specific clarification to avoid unwarranted litigation.