It is expected that the sanitary napkins would get cheaper by 1.5-2.5% and not 12% in the absence of Input Tax Credit. However, the reason for raising the price of the sanitary napkin is still unfound. The Government is not giving any help to the demands of the Feminine and Infant Hygiene Association (FIHA) to provide input tax credit (ITC) on sanitary napkins.
Big companies are said to be working on the cutting of the production price of sanitary napkins in the range of 1.5-2.5 percent in contrary to the general expectation that the price of the sanitary napkins would reduce by 12 percent following the GST exemption.
In the new scenario, the GST is zero but there’s no Input tax credit
Feminine and Infant Hygiene Association said, the Input tax credit should be allowed to all the manufacturers who make in India, the Industry may be able to pass on the benefits that are received from the rate cut to customers. If we take a look at the previous data, the GST was charged at 12 per cent but the Input Tax Credit was available, and in new scenario the GST is zero but there’s no Input tax credit, the difference that is paid in the Tax by a manufacturer would amount to be around 1.2 percent.
Undoubtedly, the figures and Margins are hypothetical but still, they provide a direction and if the purchase price or margins varies then it may differ from manufacturer to manufacturer.
“Although large corporates are manufacturing these pads and non- levy of GST on the outward may not increase the price effectively as wrongly understood, as the cost of the unutilized ITC would be lesser than the GST charged on the outward sale price i.e.12 percent. The rationale lies in understanding the math of the cost involved, value added by the manufacturer, ITC available- which may not be available if the price if the outward GST is exempted and consequently the tax absorbed to be passed on to the customer. Therefore, taking this combination, a buyer may still land up paying lesser GST eventually” Suresh Nandlal Rohira, Grant Thornton India partner said.
Now, to encourage rural hygiene, the government need to take some major steps to commercialise hygiene such as products end to end or incentivizing the Input Tax cost for the manufacturer that are supplying rural areas the real benefits to the customers.
In a country like India, Sanitary napkins have a very low penetration of around 20 percent in India and the levels are extremely low in the hinterland. The government needs to take some major steps in related to the health and the hygiene of the female.
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