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Exempting Necessity: An Encouragement with a hint of Economic Strain.


A moment of victory for women who joined the protest against the 12% tax imposed on sanitary napkins.

The government scrapped a controversial tax on sanitary pads on Saturday, 21st July, a move hailed by campaigners. Activists say removing the tax on pads tackles one of the biggest barriers to education for girls, who are often forced to stay at home due to a lack of access to clean hygiene products, while also facing stigma and a lack of toilets in schools.

“I am sure all mothers and sisters will be very happy to hear that sanitary pads are now 100 percent exempt from tax,” Interim Finance Minister, Piyush Goyal, told reporters at a news conference in New Delhi. Sanitary pads were taxed at 12 percent under Goods and Services Tax (GST) that was launched in July 2017.

Last year, lawmaker Sushmita Dev launched a petition to demand a reduction or total removal of taxes on pads, citing that about 70 per cent of women in the country could not afford them. The online petition gained more than 400,000 signatures. “This was a most-awaited and necessary step to help girls and women to stay in school, their jobs, to practise proper menstrual hygiene,” said Surbhi Singh, founder of Sachhi Saheli, a charity that raises awareness on menstrual health.

On one hand the decision is prompting praise all over the country, and on the other hand, raising questions about what the new rate will actually mean, and why the government had spent the last year arguing that a lower tax rate would be a bad thing.

In July 2017, the government even put out a press release explaining this position. Jaitley and the press release made the following argument:

Despite this, Jaitley’s successor in the finance ministry, Piyush Goyal, has gone ahead and done just that.

Despite the praise, some are even arguing that the prices of sanitary napkins will actually go up after this move since local manufacturers, who have to pay input taxes but do not get any input credit, will increase their prices. This was also the argument of many who had supported the government’s position until now. A few others have said that though the prices will not go higher, the change is unlikely to lower them tremendously either. According to the Indian Express, Piyush Goyal was asked about this: “When asked, Goyal said calculations showed that input tax credit on sanitary napkins was about 3-4 per cent, and the government would ensure a lower price for the end product.”

What seems to be unclear is how the exemption for sanitary napkins will actually work. If the sanitary napkins are technically under GST but taxed at 0%, manufacturers will still be able to get input tax credits. If the product is entirely exempt from GST, then manufacturers will not be able to get any input tax credit.

As of now what is clear is that, after a year of arguing rather vehemently against this idea, the government seems to have changed its mind.

Exempting a necessity has definitely paved a way to recognition of a new thinking among the nation. Whether the decision would lead to an economic strain or not, the sure thing is that the move has encouraged development on a new level altogether.