Bombay HC quashes govt’s 18% GST on hand sanitisers

Mumbai: In a significant ruling, the Bombay High Court on Monday quashed a 2020 press release issued by the Union Ministry of Finance that classified alcohol-based hand sanitisers as “disinfectants,” attracting an 18 per cent Goods and Services Tax (GST). The court emphasised that such classifications fall solely within the purview of judicial and quasi-judicial authorities.

A division bench of Justices M S Sonak and Jitendra Jain observed that the press release had effectively directed these authorities to categorise hand sanitisers under a specific GST bracket. “The Ministry’s press release virtually issued a fiat, undermining the independence of judicial and quasi-judicial bodies under the Central Goods and Services Tax Act,” the bench noted.

The court stressed the constitutional principle of separation of powers, stating, “The executive cannot transgress on the functions within the exclusive province of judicial or quasi-judicial authorities. Any attempt to influence or dictate their decision-making process is impermissible.”

The ruling came in response to a petition by Schulke India Pvt Ltd, a Mumbai-based company manufacturing hand sanitisers.

The company argued that its products qualified as “medicaments,” which attract a lower GST rate. However, the 2020 press release classified such products as “disinfectants,” leading to a higher tax burden.

Following the press release, the Directorate General of GST Intelligence issued a show-cause notice to the company in April 2023, seeking recovery of differential tax, along with interest and penalties.

The court made a clear distinction between executive and judicial functions, stating, “The classification of products is fundamentally an interpretative exercise.

This task must be carried out independently by judicial and quasi-judicial authorities without interference from the executive.”

While the bench quashed the press release, it refrained from quashing the show-cause notice issued to the company. The court noted that the company had the option to challenge the notice through alternative remedies under the law.

“We are satisfied that the petitioner has made out a case for quashing the press release. This will ensure that judicial and quasi-judicial authorities can decide

the issue of classification independently, without even a remote influence from the executive,” the court stated.