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The controversy has been taken before regarding the category of products, multiple tax slabs of GST increased Confusion

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The controversy has been taken before regarding the category of products, multiple tax slabs of GST increased Confusion

tax slabs of GST

The controversy has been taken before regarding the category of products, multiple tax slabs of GST increased Confusion

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There is a replacement discussion within the country lately which is about the category of roti and parantha and tax classification thereon. On Friday, the Karnataka Bench of Authority for Advance Ruling (AAR) ruled that able to Eat Paratha; Khakhara is different from chapatti or roti. In such a situation, the tax expert says that a lot of other classification disputes will arise from this decision.

By the way, this type of debate isn’t new. Even before this, there has been confusion regarding the category of other products like Nestle’s KitKat Biscuit or Chocolate, Dabur Red Dental Brush Tooth Powder or medicine, Marico’s Parachute hairdressing or simply copra oil, etc.

In November 2019, the Madhya Pradesh Authority for Advanced Ruling (AAR) reacted to a petition by Alisha Foods. This petition was on whether Fryums should be considered as papad, which is subject to five percent tax or should be included in such food items which aren’t mentioned elsewhere. On this, the authority had given the choice that they might fall under another category.

Tax demand from the revenue authority is additionally a priority
Due to many tax rates in GST, such disputes are getting to continue. the method of deciding the categories of varied products remains happening . one among the concerns behind such petitions being put by the manufacturers regarding the category of the merchandise is that if the category isn’t clear, then there could also be a drag with the tax going forward. it’s going to be that by considering the merchandise within the high tax category, tax authorities can demand the outstanding tax, which can include penalty, interest etc. Therefore, it’s important to urge the classification wiped out advance.

There are such cases within the past
Many MCG companies are at issue with the revenue authorities over product classification. KitKat case as an example. In 1999, within the Nestlé India Limited vs Commissioner of Central Excise, Mumbai dispute, the decision went in favour of Nestlé that KitKat maybe a biscuit and not chocolate. Therefore, the tax burden on the manufacturer is going to be less.

Similarly, Marico, who manufactures parachute copra oil, has also had a dispute with the state governments whether the parachute is hairdressing or copra oil . the corporate had tried to stay the merchandise within the copra oil category in order that tax would be reduced. But at the time of the implementation of GST, the Kerala government within the meeting of the GST Council suggests a robust point that copra oil is taken into account as edible oil.

Why do companies want to stay the rate low
Tax experts say that the lower the rate on products, the greater the likelihood of companies to possess higher margins, especially within the case of FMCG products. Abhishek Jain, the tax partner at EY, says that thanks to the wide selection of tax slabs in GST and ambiguity within the law, there has been scope for disputes associated with the merchandise category. Revenue authorities shouldn’t raise a dispute about tax, so companies want clarity about the category beforehand. If there’s a discount within the rate slabs in GST, it can help to scale back such disputes regarding the merchandise category.

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Anurag Srivastva
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