Sanitary Napkin Manufacturers Under Scrutiny By GST NAA

The anti-profiteering authority of the goods & services tax (GST) is closely inspecting the top manufacturers of sanitary pads including Johnson & Johnson (J&J) and Procter & Gamble (P&G) to see whether they are passing on the GST price reduction benefits to the buyers/consumers of sanitary napkins or not. If found guilty of GST profiteering, the companies will be issued notices levying huge penalties by the authority.

In its meeting on July 21, the GST Council had decided to remove the tax from sanitary napkins, which earlier attracted a GST of 12%. Even after tax exemption, consumers have been complaining of no price reduction on these items, which forced the anti-profiteering authority to look into the matter.

“Initial reports suggest that a large section of customers is not getting the benefit of the recent GST reduction. In many cases, the benefit may not be commensurate with the rate cut,” said a senior CBIC official.

Whisper, Kortex, Carefree, Stayfree and She are the leading sanitary pad brands in India, all of which are under the GST Council radar now.

The investigating arm of the National Anti-Profiteering Authority (NAA) is examining the situation and will report to the committee soon. The NAA was formed with the purpose to ensure that the GST input credit benefits are passed on by manufacturers and dealers to the consumers in the form of price reduction, irrespective of whether input credits are received by firms or not.

Even though firms were instructed to advertise the new prices to their customers, many shopkeepers are still selling pads at old prices. The main issue is of price reduction on the existing stock. “We haven’t got any communication from the manufacturers to lower the cost of the existing stock. We can’t reduce the cost at our end as it impacts our margins. There is no intimation about the new stock,” said a Delhi based shopkeeper.

In some cases, the advertisements by manufacturers showed lower price reduction as compared to the actual GST rate cut. For instance, an advertisement by p&G showed a 2.5% to 6.5% price reduction while the actual price cut in GST rate is 12%.

“We have passed on the net benefits arising out of the exemption of GST on sanitary napkins, thereby fully complying with the applicable regulations,” said a Johnson & Johnson spokesperson.

The government has instructed the NAA officials to conduct an investigation and report back to the committee. “NAA on the basis of the report will decide on penalty or any other action against the companies if found guilty,” said a government source.