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2021 (7) TMI 265 - AAAR - GSTClassification of goods - rate of tax - alcohol based hand santizer - classifiable under Heading 3808 under the Customs Tariff Act taxable at 18% or classifiable under HSN 3004 taxable taxable 12%? - HELD THAT - The alcohol-based hand sanitizers are commonly understood as hand hygiene product used to disinfect the hands from disease spreading germs. It is not commonly considered as a medicine used for the treatment or prevention of any disease or ailment. Even during the current pandemic, the use of alcohol-based hand sanitizer has been propagated only as a good hand hygiene practice which will prevent the transmission of the virus from one human being to another - The survey conducted among a cross section of people from different age groups showed that almost 79% were aware that hand sanitizer is used for maintaining good hand hygiene and to prevent the spread of disease during the Covid pandemic. Therefore, applying this test of common parlance and the fact that the impugned product does not have any therapeutic or prophylactic properties, we hold that the alcohol-based hand sanitizer cannot be classified as a medicament under Chapter Heading 3004 as claimed by the Appellant. Classification under HSN Heading 38.08 - HELD THAT - A DGFT Notification is not an authority for determining the classification of goods under GST law. Classification of goods is to be determined based solely on the description of goods given in the First Schedule to the Customs Tariff Act read together with the relevant Section Notes and Chapter Notes. Moreover, the conditions and restrictions contemplated by one statute having a different object and purpose should not be mechanically imported and applied to a fiscal statute. The reference to the ITC HS Code for Alcohol-based hand sanitizers which has been made in the DGFT Notification dated 6-5-2020 is not a standard for interpreting the classification of goods as per the Customs Tariff Act. Rate of tax - HELD THAT - The goods falling under Chapter Heading 3808 attract a tax rate of 9% CGST and 9% SGST in terms of entry Sl.No 87 of Schedule III of Notification No 11/2017 CT (R) dated 28-06-2017. With effect from 14th June 2021 up to 30th September 2021, the GST rate on hand sanitizer falling under Chapter Heading 3808.94 has been reduced to 5% GST (i.e 2.5% CGST and 2.5% SGST) vide Notification No 05/2021 CT (R) dated 14th June 2021.
Issues Involved:
1. Classification of alcohol-based hand sanitizer under GST. 2. Applicable GST rate for alcohol-based hand sanitizer. 3. Condonation of delay in filing the appeal. Issue-wise Detailed Analysis: 1. Classification of Alcohol-based Hand Sanitizer under GST: The appellant, engaged in manufacturing various consumer products, including alcohol-based hand sanitizers, sought clarification on the appropriate GST classification for hand sanitizers. They argued that the product should be classified under HSN 3004 (medicaments) with a GST rate of 12%, instead of HSN 3808.94 (disinfectants) with a GST rate of 18%. The appellant's primary argument was based on the therapeutic and prophylactic properties of the hand sanitizer, as it is used to kill germs and prevent diseases. They supported their claim by citing various Supreme Court judgments and the definition of "prophylactic" from legal lexicons. Additionally, they emphasized that the product is manufactured under a drug license as per the Drugs and Cosmetics Act, 1940, and meets the standards prescribed by the Indian Pharmacopoeia. However, the appellate authority rejected these arguments, stating that the hand sanitizer does not have substantial therapeutic or prophylactic properties. It is primarily a disinfectant used for hand hygiene, preventing the transmission of germs, rather than treating or preventing diseases. Therefore, it does not qualify as a medicament under Chapter Heading 3004 but falls under Chapter Heading 3808.94 as a disinfectant. 2. Applicable GST Rate for Alcohol-based Hand Sanitizer: The appellant contended that the GST rate for hand sanitizers should be 12% under HSN 3004. They also referred to a DGFT notification that classified hand sanitizers under multiple headings, including 3004, to support their claim. The appellate authority clarified that the DGFT notification is not authoritative for GST classification. The classification must be based on the Customs Tariff Act, relevant Section Notes, and Chapter Notes. The authority upheld the lower ruling that alcohol-based hand sanitizers fall under Chapter Heading 3808.94, attracting a GST rate of 18% (9% CGST and 9% SGST). However, from June 14, 2021, to September 30, 2021, the GST rate on hand sanitizers under Chapter Heading 3808.94 was reduced to 5% (2.5% CGST and 2.5% SGST). 3. Condonation of Delay in Filing the Appeal: The appellant sought condonation for a 12-day delay in filing the appeal, citing the COVID-19 pandemic and quarantine of the authorized signatory as reasons. The appellate authority condoned the delay, exercising the power vested under the proviso to Section 100(2) of the CGST Act, which allows for an additional 30 days beyond the initial 30-day filing period. Conclusion: The appellate authority dismissed the appeal, upholding the lower authority's order that alcohol-based hand sanitizers are classifiable under Chapter Heading 3808.94 as disinfectants, attracting a GST rate of 18%. The delay in filing the appeal was condoned, but the appellant's arguments for reclassification under HSN 3004 were rejected.
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