2021 (3) TMI 141 - AAR - GST

Classification of Hand Sanitizer for GST: Ruling on Applicable Rate and Category

In Re: M/s. Wipro Enterprises Private Limited,

The case involved the appropriate classification and applicable GST rate for Hand Sanitizer. The authority ruled that Hand Sanitizers are classified under ... Classification of goods - rate of GST - Hand Sanitizer - HELD THAT:- The hand sanitizers are used to disinfect the skin surfaces from microbes and viruses. All disinfectants have a property of killing disease causing agents and can claim to be prophylactic in nature. But the main activity of the disinfectant is to disinfect the surfaces - Disinfectants are chemical agents designed to inactivate or destroy microorganisms on inert surfaces. Disinfectants kill more germs than sanitizers. Disinfectants are frequently used in hospitals, dental surgeries, kitchens, and bathrooms to kill infectious organisms. For any goods to be covered under HSN 3004, the said goods should be for “therapeutic use” or for “prophylactic use”. It is seen that the agent would be called a therapeutic agent only if it has a curative effect against a disease. Since the product in question is not used for treatment of an already prevalent disease in a patient, the same cannot be said to have a therapeutic use - The product in question, no doubt is used as an alternative to soap, it can't be said to have a prophylactic use in COVID Infection as the impugned produce is not specific to COVID-19 infection. The same cannot be compared with Polio drops or covaxin, wherein the Polio drops have a prophylactic use in preventing Polio myelitis disease or covaxin helps in preventing COVID -19 infection. In the instant case, the impugned product is not specific to any disease. Hence the goods in question cannot be covered under HSN 3004. The impugned goods are covered under heading 3808, which in turn is covered under entry no. 87 of Schedule III of Notification No.01/2017 - Central Tax (Rate) dated 28.06.2017 and hence are taxable at the rate of 9% under the CGST Act. Similarly, the goods are taxable at the rate of 9% under the KGST Act. Issues Involved:1. Appropriate classification of Hand Sanitizer for the purpose of GST.2. Applicable rate of GST on Hand Sanitizer.Issue 1: Appropriate Classification of Hand Sanitizer for GSTThe applicant, engaged in manufacturing and marketing Hand Sanitizer, sought an advance ruling on its classification under GST. They argued that Hand Sanitizer should be classified under Chapter Heading 3004 as a medicament used for therapeutic or prophylactic purposes. The applicant referenced several legal precedents and definitions to support their claim that Hand Sanitizer, containing 95% v/v of ethyl alcohol and recognized by the Indian Pharmacopoeia, qualifies as a prophylactic agent.However, the authority noted that while disinfectants, including Hand Sanitizers, have properties of killing disease-causing agents and can claim to be prophylactic, their primary function is to disinfect surfaces. Disinfectants, by definition, are chemical agents designed to inactivate or destroy microorganisms on inert surfaces, and are frequently used in settings like hospitals and kitchens to kill infectious organisms.The authority referred to HSN Code 3808 94 00, which clearly covers all disinfectants. Chapter Note 1 to Chapter 38 explicitly states that this chapter does not cover medicaments (Heading 3003 or 3004). For goods to be classified under HSN 3004, they must be for 'therapeutic use' or 'prophylactic use.' The authority concluded that Hand Sanitizer does not have a therapeutic use as it is not used for the treatment of an already prevalent disease. Additionally, it does not have a specific prophylactic use against COVID-19 infection, as it is not specific to any disease like Polio drops or Covaxin.The authority also examined the explanatory notes to HSN of WCO for Heading 3004, which includes medicaments in measured doses or forms such as tablets, ampoules, capsules, etc., for therapeutic or prophylactic use. Since Hand Sanitizers are not available in these forms, they cannot be classified under Heading 3004. Similarly, HSN 3003, which covers mixed products for therapeutic or prophylactic use not put up in measured doses, was also deemed inapplicable for the same reasons.Issue 2: Applicable Rate of GST on Hand SanitizerThe authority concluded that Hand Sanitizers are classified under heading 3808 as disinfectants. This classification falls under entry no. 87 of Schedule III of Notification No.01/2017 - Central Tax (Rate) dated 28.06.2017. Consequently, Hand Sanitizers are taxable at the rate of 9% under the CGST Act and at the rate of 9% under the KGST Act.Ruling:1. Hand Sanitizers are classifiable under Heading 3808 under the Customs Tariff Act.2. Hand Sanitizers are liable to tax at the rate of 9% under the CGST Act and at the rate of 9% under the KGST Act.