Hand sanitizers would fall under Heading No. 3808 as ‘disinfectant’ and attract 18% GST: AAAR Karnataka

Case details: Appellate Authority for Advance Ruling, Karnataka Ce Chem Pharmaceuticals (P.) Ltd., In re - [2021] 129 taxmann.com 9 (AAAR-KARNATAKA)

Judiciary and Counsel Details

• • D.P. Nagendra Kumar and M.S. Srikar, Member
  • G. Shivdass, Sr. Adv. for the Applicant.

Facts of the Case

The appellant was engaged in the manufacture and sale of Isopropyl rubbing alcohol IP and Chlorhexidine Gluconate and Isopropyl Alcohol solution commonly called hand sanitizers at a large scale primarily to combat the situation arising on account of pandemic COVID-19. The appellant was of the understanding that the said goods would fall under HSN 3004 with a GST rate of 12 per cent. It approached the Authority for Advance Ruling (AAR) seeking a ruling on appropriate classification for the purpose of GST and applicable rate of GST on hand sanitizer. The AAR held hand sanitizers would merit classification under Chapter Heading 3808 and attract 18 per cent GST in terms of entry No. 87 of Schedule III of Notification No. 01/2017-Central Tax (Rate), dated 28-06-2017. It filed appeal against the order.

AAAR Held

The Appellate Authority for Advance Ruling (AAAR) noted that the Explanatory Notes to the HSN Heading 38.08 provides that disinfectants are agents which destroy or irreversibly inactivate undesirable bacteria, viruses or other micro-organisms, generally on inanimate objects. It is also stated that this group includes sanitizers, bacteriostats and sterilisers. The argument of appellant that the DGFT Notification, dated 6-5-2020 prohibits the export of Alcohol-based hand sanitizers falling under ITC HS Codes 3004, 3401, 3402 and 3808.94 and Chapter Headings 34.01 and 34.02 pertains to soaps and other organic surface-active products used for washing the skin and Chapter Heading 3808.94 covers insecticides and disinfectants generally used on inanimate surfaces. Therefore, it was argued that Heading 30.04 would be the most appropriate heading which covers alcohol-based hand sanitizers. The AAAR noted that DGFT Notification is not an authority for determining the classification of goods under GST law and therefore, this submission of the appellant was rejected. Thus, it was held that the order passed by AAR is upheld and 18 per cent GST would be levied. However, With effect from 14-6-2021 up to 30-9-2021, the GST rate on hand sanitizer falling under Chapter Heading 3808.94 has been reduced to 5 per cent vide Notification No. 05/2021 Central Tax (Rate), dated 14-6-2021.

Case Review

• • Ce Chem Pharmaceuticals (P.) Ltd., In re [2021] 125 taxmann.com 189 (AAR – Kar.) (para 18) affirmed
  • Reckit Benckiser (India) Ltd. v. State of Kerala 2011 (270) ELT 25 (Ker). (para 14) followed.

List of Cases Referred to

• • Ce Chem Pharmaceuticals (P.) Ltd., In re [2021] 125 taxmann.com 189 (AAR – Kar.) (para 5)
  • Sujanil Chemo Industries v. CCE & C 2005 taxmann.com 842 (SC) (para 6.1)
  • CCE v. Wockhardt Life Sciences Ltd. [2012] 28 taxmann.com 431 (SC) (para 6.1)
  • CCE v. Ciens Laboratories[2013] 38 taxmann.com 337/42 GST 21 (SC) (para 6.1)
  • CCE v. Shree Baidyanath Ayurved Bhawan Ltd. 2009 taxmann.com 1041 (SC) (para 6.4)
  • Dabur (India) Ltd. v. Collector of Central Excise 2005 taxmann.com 1222 (SC) (para 6.4)
  • CST v. Balsara Hygiene Products Ltd. 1986 taxmann.com 761 (All.) (para 6.4)
  • Deena Jee Sansthan v. CCE [2019] 101 taxmann.com 407/71 GST 601 (SC) (para 13)
  • CCE v. Connaught Plaza Restaurant (P.) Ltd. 2012 (286) ELT 321 (SC) (para 13)
  • Reckit Benckiser (India) Ltd. v. State of Kerala 2011 (270) ELT 25 (Ker.) (para 14).