Finance Minister Arun Jaitley said on Thursday that the opposition to a 12% tax rate on sanitary napkins was “ill-informed” and that Indian manufacturers would lose to Chinese products if the tax rate on them is reduced.

He said the effective tax on sanitary napkins, taking input tax credits into account, was about 3%-4%, as compared with around 13% before the Goods and Services Tax regime was rolled out. “If you reduce the 12% [tax rate on sanitary napkins]...we won’t have an Indian manufacturer left,” Jaitley said at the Hindustan Times Leadership Summit.

The Centre had made a similar argument during the hearing of a petition in the Delhi High Court earlier this month.

Economic growth and GST

Jaitley also said a single tax slab was not possible in India because “we cannot have a tax system which has the same rate for a hawai chappal [slippers] and a Mercedes car”.

The Goods and Services Tax structure, launched on July 1, has five tax slabs – nil, 5%, 12%, 18% and 28%. The GST Council, which decides on the tax rates, rationalised tax slabs for several goods and services at its last meeting on November 10.

Future rationalisation of GST rates will depend on revenue collections, the finance minister said.

The next year’s Union Budget could provide for more spending on infrastructure and the rural sector, Jaitley said. He also ruled out privatisation of state-run banks, and said, “I am pragmatic to realise that political opinion is not ready to take that decision.”

Talking about India’s economic growth, Jaitley said the National Democratic Alliance government had brought structural changes even when the rest of the world was slowing down. He said achieving a 10% growth rate in the Gross Domestic Product was “very challenging” and would depend on how the global economy performs.

A 10% growth rate does not just depend upon internal factors...It has to factor in how the world is moving. If the world continues to be in recovery mode, like it currently is, then we cannot be growing at an exponential rate. Even then, we brought structural changes when the rest of the world was slowing down...We need a boom period like 2003-2008 to grow at 10% growth rate.  

— Arun Jaitley