The Goods and Services Tax (GST) department has raised questions about the classification of Dabur’s popular product, Hajmola, which could lead to a tax dispute between the company and the government. The issue revolves around whether Hajmola should be taxed at 18% as a candy or 12% as an ayurvedic item. Dabur has defended its product as an ayurvedic preparation, citing earlier court rulings that supported this classification. The company has responded to a query from the Directorate General of GST Intelligence (DGGI), maintaining that Hajmola is not a sugar-boiled candy.
This dispute highlights the confusion companies face under India’s four-tier GST system, where items are taxed at different rates depending on their classification. The classification of products has been a contentious issue, with various disputes arising over the right tax rate for several products. Previous court rulings have supported Dabur’s stance on Hajmola, allowing it to be treated as an ayurvedic product, which falls under a lower tax rate.
Similar disputes have arisen over other products, including flavored milk, live events spice mixes, and frozen parathas. For instance, the Madras High Court ruled that flavored milk should be taxed at 5% GST, classifying it under ‘milk and cream’, rather than as a ‘beverage containing milk’ which attracts 12% GST. The classification of spice mixes has also been debated, with tax authorities arguing that they should be classified as ‘mixed condiments and seasonings’ under HSN 2103, attracting 18% GST, rather than as ‘spices’ under HSN 0910, which are taxed at 5%.
The issue of frozen parathas has also led to differing rulings, with the Appellate Authority for Advance Ruling (AAAR) holding that frozen parathas should be taxed at 18% GST, while earlier rulings classified similar products as ‘roti’, attracting 5% GST. These disputes underscore the need for clarity and consistency in product classification under the GST system to avoid confusion and disputes between companies and tax authorities. Ultimately, the classification of Hajmola and other products will depend on the specific characteristics and ingredients of each item, and the authorities’ interpretation of the GST laws and regulations.