India has scrapped its controversial 12 per cent “tampon tax” as part of a broader package of tax cuts aimed at boosting the economy.
The decision over the weekend to exempt sanitary pads from India’s comprehensive goods-and-service tax came after a year-long campaign against the levy. Activists said it was highly callous to tax menstrual hygiene products in a country where most women still have no access to them at all.
At the weekend meeting, India’s GST council approved reducing the value added tax on refrigerators, small television sets, washing machines, hair driers and a wide range of kitchen appliances, such as blenders, from 28 per cent to 18 per cent.
The council said tax rates on paints, special purpose trucks such as concrete mixers, work trucks and some cosmetic products would also be cut from 28 to 18 per cent.
Industry groups and analysts cheered the generous reductions, saying they would help boost sales especially during the upcoming Diwali holiday season, the peak shopping period in the annual calendar.
“It’s a very, very significant tax cut,” Abhishek Jain, a tax partner at EY India, told the FT on Sunday. “It will not only benefit consumers but also the industry players. In the short term, it may have some impact on government collections. But if overall demand picks up, that should compensate.”
Analysts estimate that government revenues could be impacted by $870m to $1.5bn a year, according to local newspapers.
But while the shift was intended to simplify taxes, the transition has been plagued by difficulties, including a complex system of five different tax slabs — the highest of which was 28 per cent — and the exclusion of core consumer items, namely fuel and alcohol, from the system.
Mr Jain said the move to take a wide range of aspirational household items like refrigerators, televisions and washing machines out of the 28 per cent tax category was an important step towards rationalising the tax brackets.
“The overall idea is that the 28 per cent rate will only be for ‘super luxury’ or ‘sin goods’ but initially they kept these other goods because they were concerned about overall collections,” Mr Jain said. “But with the festive season and elections coming up, the government thought they now need to restrict this 28 per cent category. And they’ve largely done it.”
But the move that attracted the most plaudits was the scrapping of the GST on sanitary pads, which had been the subject of fierce ire from women’s right activists.
Only a tiny percentage of Indian women — estimates vary from 7 to 12 per cent — can even afford sanitary pads or other modern menstrual hygiene products; nearly 90 per cent still rely on old cloth rags, which they wash and reuse.
The onset of menstruation — and difficulties in dealing with it — is a major factor driving adolescent girls out of school, particularly in India’s rural areas.
It is in this context that activists had vociferously protested the imposition of a 12 per cent GST on sanitary pads, filing legal challenges in India’s court system.
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