During recent times when COVID 19 Pandemic has impacted the businesses all over the globe. The Government of India has taken various preventive measures to provide relief to trade and businesses. In this respect, the Government of India (“GOI”) vide Order No. 40- 3/2020-DM-I (A) dated 15th April 2020 issued Consolidated Revised Guidelines through the Ministry of Home Affairs (“MHA”) for the safe operations of industrial and commercial establishments (“Circular”).

MHA in addition to the above mentioned directive, issued order dated 30th May 2020 and 29th June 2020 for phase re-opening (unlock 1 & 2 ) stipulating various COVID-19 management directives including  the frequent sanitization of the entire workplace, thereof put an additional preventive measure against the pandemic in order to resume the trade on forefront.

Considering the directive given by the GOI, the businesses are now required to follow to the law of land and further, adhere to the rules in this regard. Since now the sanitization of the workplace is pre-requisite to conduct the lawful business activities along with safeguarding the work force, the same has added as an additional cost to the Companies on procurements the essential sanitization facilities as compared to period prior to COVID-19 crisis.

A collective understanding of both the conditions prescribed under the GST law and the directives creating a mandatory procurement requirements under law, amicably implies that the trades and businesses should be eligible for ITC on Sanitizers, face Masks, Gloves, etc. since being a law abiding person to complying with the legal requirements.

It is worthwhile to note that the ITC on sanitizers/mask/gloves etc. are neither tested in GST nor any clarification is provided by GOI amid COVID-19 pandemic, which is need of the time. Therefore, opening up pandora box on the availability of input tax credit these essential items during COVID-19 pandemic which are undertaken by the trade and businesses to comply with the directives of safety and protection mandated under law for the time being in force.

On the other hand, it is worth mentioning that the government is much proactive in pronouncing and probing inquiry for any possible GST evasion vis-a vis revenue leakage in relation to its significance during the pandemic and with multiple players involved in manufacturing the same.

It is further pertinent to note that the Goa-bench of the GST-Authority for Advance Rulings (AAR) dated 29 June 2020 has ruled that Alcohol based hand sanitizers attract a GST of 18% and merely classifying any goods as essential commodity will not be the criteria for exempting such Goods from GST.

In addition to above, the government further to safeguard the interest of the revenue has come up with the press release on 15 July 2020 by clarifying that the same would be taxed @ 18% in order to stop any further revenue leakage on wrong classification. However, duly forget to provide any clarification on the availability of input tax credit available on procurement on various essentials in this regard. The same could be considered as opening the umbrella of litigations.

In this challenging time, the urge of the trades and businesses from the government is to come with the expeditious measures on this front and clarify the matters in the interest of trade and business and lift the veil of revenue-oriented approach.

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March 2021