Tax department does not think sanitizer companies accounts are clean
Companies making hand sanitizers and the raw materials used in them have come under scrutiny for allegedly categorizing these items incorrectly and escaping tax.
Under the GST framework, medicaments are broadly medicines, anything that can be used as medicine or used to manufacture medicine. Disinfectants are essentially soap or liquids used as soaps.
Pharmaceutical companies say sanitizers are medicaments, while the taxman considers them disinfectants. The indirect tax department’s investigation arm, Director General of GST Intelligence (DGGI), has initiated an investigation in this regard and even sent notices to some companies.
The DGGI has said “medicaments” consist of mixed or unmixed products for therapeutic or prophylactic use, in measured doses.
Manufacturers argue that hand sanitizers are crucial in the battle against Covid-19, therefore equivalent to medicaments, and should be taxed at 12%. A group of Gujarat-based pharmaceutical companies had approached the Supreme Court over this matter. The Supreme Court told them to approach a high court against the tax department.
