Unintended Corporate (and Tax) Consequences of India’s Repeal of the #TamponTax

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In July, 2018, India repealed its 12% goods and services tax (GST) on menstrual hygiene products. (News coverage here and here, e.g.) One (unintended, I suspect) consequence is the likely disadvantaging of domestic Indian manufacturers of these products. When the GST was in place, the manufacturers received what is known as an “input tax credit,” or a credit for certain component parts of the final product. For example, cotton is taxed at a rate of 5%, plastic packaging sheets are taxed at 18%.

When the Indian GST on menstrual hygiene products was eliminated, the credit available to the manufacturers evaporated.  That means domestic Indian producers now must pay the 5% tax on cotton, 18% tax on plastic packaging sheets, etc. Foreign corporations, not subject to those input taxes, therefore will be able to offer the product more cheaply, in all likelihood.

Some commentators believe that the Indian government caved to popular demand and/or pressure from multinational corporations (see, e.g., here), without understanding how the repeal of the GST on menstrual hygiene products would impact domestic Indian manufacturers. That may be true, and it points to the need to have tax lawyers involved at all levels of discussion about potential changes to a jurisdiction’s laws.

Mayuri Bhattacharjee, a menstrual equity activist and founder of the Sikun Relief Foundation has written (here) that the GST repeal was “an emotional victory and the silver lining was that it got people talking about a taboo topic,” despite the negative knock-on effect for Indian manufacturers.  She urges (here) mandatory menstrual hygiene education in schools; government incentives for making menstrual hygiene products more environmentally friendly; and holding state governments accountable for their obligations to make available water, toilets and safe methods for disposal of menstrual hygiene products.

I fully support Ms. Bhattacharjee’s call for a future that is “free from menstrual taboos and no one is held behind by their periods.” I believe it is possible to do that while also creating tax incentives that will keep domestic manufacturers of menstrual hygiene products competitive with foreign companies.

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