Despite 12% GST-cut, price of sanitary-napkins to drop by 2-3%
Days after sanitary napkins were exempted from GST, companies like Procter & Gamble (P&G) and Johnson & Johnson (J&J) have announced price cuts. However, compared to the GST cut from 12% to zero, the resultant reduction in MRP would be much lower, roughly 2-3%, reports TOI. This is because along with removal of GST, the government has also removed input tax credit (ITC).
What is input tax credit?
ITC allows manufacturers to claim a refund on taxes paid on inputs. Items exempted from GST don't qualify for ITC. In case of sanitary napkins, many components attract a higher tax incidence than the product itself. E.g. super-absorbent polymer, polyethene film, glue and packing cover are taxed at 18%. While manufacturers will now lose GST, they'll have to pay taxes on these components.
A GST cut of 12% wouldn't imply drastic price-cuts either
Moreover, the GST cut in itself wasn't drastic. Without considering ITC, a 12% reduction brings Rs. 56 down to Rs. 50, a change that presumably won't influence buying behavior. In a statement, FIHA (Feminine and Infant Hygiene Association) said, "While (the cut) was well-intended, this decision is unlikely to achieve its (planned) objective - to make this essential category more affordable for consumers."
Small and medium players in a bleak situation
The situation is darker still for small and medium players, as imports could become cheaper now. Many of them have already taken loans for production. Others who have signed government tenders at existing rates wouldn't even be able to get out considering legal ramifications.
Considering stats, more should be done to make napkins accessible
Use of napkins needs to be promoted extensively in India, where 62% women aged 15-24 use cloth during menstruation due to lack of resources, the National Family Health Survey found. Cloth use was higher among rural women (71%) and Scheduled Tribes (75.4%). Women from the highest wealth quintile were over four times likelier to use hygienic methods as the other extreme (89% versus 21%).
