Delhi High Court has turned down the PIL (Public Interest Litigation) filed for reduction of GST rates on alcohol-based sanitizers vide its judgement order dated August 13, 2020.
In regard to reduction of GST rates on masks and sanitizers, Delhi High Court strongly stated that it should be kept in mind that rate of tax is not to be challenged in court unless the rate is confiscatory in nature. Court said petitioner failed to argue as to how the present GST rate in respect of these products is confiscatory in nature. The government cannot be directed to reduce the rate on the commodities just because of the fact that petitioner feels that applicable GST rate on masks and sanitizers is excessive.
Masks and sanitizers were included in the list of essential commodities under the Essential Commodity Act,1955 through gazetted notification dated 13.03.20 but the notification was not extended beyond 30th June 2020. The notification was discontinued by government citing that there were no more any adverse reports regarding the availability of these products or their prices.
The PIL also requested for extension of this classification of masks and sanitizers as essential commodity under the Essential Commodity Act, 1955 and also to fix the retail prices of these products.
The court has also dismissed the request stating that this was a conscious decision made by government not to extend the notification and the petitioner has not put on record any material to demonstrate that the decision taken by government is erroneous or unreasonable. The court stated that including any commodity in Essential commodity list under the subject Act is a policy decision and court could have only interfered with it if the decision was unreasonable or arbitrary which in this case couldn’t be so concluded.
The government though in court assured that it will keep monitoring the situation carefully in regard to prices and quality of these commodities and would take remedial steps as per requirement.
The judgement was pronounced in respect of petition filed by Gaurav Yadav & ANR.
Since July 20 Advance ruling by AAR Goa (Springfields India Distilleries) that Alcohol based hand sanitizers are to be taxed at 18%, the higher tax rate of Sanitizers has been an issue of debate. Many opposition leaders even criticized government of taxing sanitizers at higher rates at the moment of corona pandemic. Sitaram Yechury, CPIM leader, tweeted and demanded that Modi Government should immediately exempt all taxes on sanitizers and other items which are essential to save human lives.
After taking a note of these media reports, Ministry Finance released a press note dated 15.07.20 explaining the reason of Hand sanitizer being taxed at 18%. The government said that sanitizers are disinfectants like soaps, anti-bacterial liquids, Dettol etc which are taxed at standard rate of 18% GST.
Through press note it was also explained that inputs such as chemicals for manufacturing hand sanitizers, packing material and input services are also taxed at 18%. Therefore, reducing GST rate on the product would result in inverted duty structure which would put the domestic manufacturers at disadvantage as compared to importers because lower GST rates would make import cheaper. Eventually consumers would also not benefit from lower GST rates. And it would also be against Atam Nirbhar Bharat Scheme which would be impacted.
CA Kalpak Kaplash
