After the government’s move to reduce Goods and Services Tax rates on sanitary pads the women welcomed the move, according to the information given by the experts that even after reducing the GST rates from 12 per cent to nil on sanitary pads will not make much difference in the price.
Earlier, when the tax levied on pads was 12 per cent, the government would refund the taxes paid on inputs to avoid cascading or double taxation.
Production of sanitary pads include major raw materials like glue, super-absorbent polymer, poly-ethylene film and packing material — all of which are taxed at 18 per cent — and thermo-bonded nonwovens, release paper and wood pulp, which are taxed at 12 per cent.
As per the information given by partner-indirect tax at KPMG, Waman Parkhi stated: “Assume that a pad has a selling price of Rs 100 and is taxed at 12 per cent. The product will be sold at Rs 100 plus Rs 12 tax, i.e. Rs 112.”
Parkhi further went on to say: “For the manufacturer, assume the inputs cost Rs 80, and are taxed at an average of 15 per cent. By this logic, the manufacturer pays Rs 12 as tax. Thus, in this case, the tax does not become part of the manufacturer’s cost.”
He added: “If the sanitary napkin is exempted, tax paid to input suppliers would become a cost and product would have to be sold at Rs 112. The product price would therefore not change despite the product being exempted.”
“Unless there is a decrease in the cost of raw materials or the tax paid on raw materials, the price of the sanitary napkins will not change much,” Parkhi said.