Why zero GST on sanitary napkins may just be a populist measure

Meenakshi Verma Ambwani Maitri Porecha New Delhi | Updated on July 26, 2018 Published on July 25, 2018

Not good news The decision to withdraw GST on sanitary pads may have been influenced by misinformed campaigns   -  GETTY IMAGES/ISTOCKPHOTO

Industry feels costs will rise with no input tax credit, leading to cheaper imports

Zero GST on sanitary napkins may after all be a populist measure, as domestic manufacturers feel the government may have given in to pressure from multinational companies, and the move could lead to cheaper imports.

The domestic industry is hit because the zero rate is on the final product, and the manufacturers will still have to pay tax on cotton (5 per cent), aseptic packaging paper (12 per cent), the packaging plastic sheet (18 per cent) and advertising (18 per cent). When it was under GST, the manufacturers got input tax credit (ITC), which they will not now.

Besides, if the production costs of imported napkins are low and there is no GST component (I-GST), it will be become unviable for the local players.

The Feminine and Infant Hygiene Association (FIHA) has written to Prime Minister Narendra Modi stating that the decision to scrap GST on sanitary pads, following which no input tax credit will be available to manufacturers, may have been influenced by misinformed campaigns that were run.

Kamal Johari, Founder and Managing Director, Nobel Hygiene, who is part of FIHA, said: “With GST exemption there is no ITC, therefore costs for domestic manufacturers will increase. Also, it will not lead to any reduction in MRP for consumers. In fact, it will make it unviable to make sanitary napkins in the country and it will lead to cheaper imports from China.”

Tanvi Johri, Founder & CEO, Carmesi, a brand that offers premium bio-degradable sanitary napkins, said since the benefit of input tax credit on manufacturing, shipping, packaging or any other service involved will be forfeited, it may lead to increase in overall cost of making for manufacturers and brands.

Market size

Currently, a large chunk of the sanitary napkins are being domestically manufactured, even by multinationals. According to IMARC group, the Indian sanitary napkin market reached $441 million last year. The Commerce Ministry’s data for imports show that $19 million or merely 4.30 per cent are imported mainly from China, South Korea, Thailand and Taiwan.

Today, there are four big players that dominate supermarket shelves in India:  P&G’s Whisper (majority of which is manufactured locally), Japanese brand Sofy (manufactured locally), Glenmark Pharma's Vwash (local) and Johnson and Johnson's Stayfree (manufactured domestically). P&G’s Whisper is priced in the range of ₹26, ₹4, ₹11 or ₹12 per pad.

“It is MNC brands that are popular — Whisper and Stayfree are the most sought after. All are similarly priced,” a sales employee working with a supermarket said.

According to government, only 12 per cent of Indian women use sanitary pads. An official from Department of Pharmaceuticals said, “the remaining 88 per cent women use alternatives such as unsanitised cloth, ashes, husk sand, newspaper or dry cow dung during the periods.”

“We had introduced a range of low-cost bio-degradable pads at ₹2.5 per pad. Post this decision we are in the process of doing cost studies and if there is savings we will pass on the benefit to consumer,” the official said.

When contacted by BusinessLine P&G said, “Since we are still in the process of assessing the impact at the moment, we don’t have an official comment on your queries.”

Arunachalam Muruganantham, popularly know as ‘padman’, believes that GST exemption will affect domestic players who run companies in urban set-ups and who have invested about ₹5-10 crore and produce disposable non-biodegradable pads.

Rural markets

On the flipside, rural markets where he has helped women set up 4,418 bio-degradable units, leading to an employment of 50,000 persons in all and an investment of ₹3.5 lakh per unit, will be unaffected.

“Earlier, our manufacturing cost per pad was ₹2.5, and women were selling at ₹3 to ₹4 per pad, with a profit margin of 50 to 100 per cent. In fact with no GST, our manufacturing cost per pad has reduced to ₹2. So it’s better for decentralised units that GST has been exempted,” he said.

“It is only the disposable pads that have got all the attention now, but we want all menstrual hygiene products to be treated the same way if menstrual equity is to be had. However, we are still going with 5 per cent tax on cloth pads and 12 per cent on menstrual cups,” said Kavya Menon, Head – Mission #SafeActivePeriods, of Chennai-based Aware India Trust.

Published on July 25, 2018
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