The Bombay High Court on Monday struck down a 2020 press release from the Centre that classified hand sanitisers as disinfectants, which would attract an 18% Goods and Services Tax (GST). The court argued that such classification decisions are the prerogative of judicial and quasi-judicial bodies, not the executive branch.
Justices M S Sonak and Jitendra Jain emphasized that the Ministry of Finance overstepped its bounds by issuing a directive that influenced how judicial and quasi-judicial authorities should classify alcohol-based hand sanitisers. The press release was seen as instructing these authorities to levy a higher GST rate applicable to disinfectants, bypassing the classification of these products as medicaments, which are taxed at a lower rate.
The court’s decision came in response to a petition by Schulke India Pvt. Ltd, a manufacturer of hand sanitisers. The company argued that its products, which have traditionally been sold as medicaments, were wrongly categorized due to the press release. This misclassification led to a show cause notice from the Directorate General of GST Intelligence in April 2023, asking why additional taxes, interest, and penalties should not be collected based on the higher rate.
In its judgment, the court underlined that any attempt by the executive to dictate or influence the classification of products compromises the independence of the adjudicative authorities designed under the Central Goods and Services Tax Act. It stated, “The executive cannot transgress on the functions within the exclusive province of the judicial or even quasi-judicial authorities.”
