The issue of whether Hajmola, a popular digestive product by Dabur, should be classified as a normal candy or an Ayurvedic preparation has resurfaced. The Directorate General of GST Intelligence (DGGI) has issued a show-cause notice to Dabur, seeking clarification on the classification of Hajmola. The classification is crucial as it affects the Goods and Services Tax (GST) rate applicable to the product. If classified as a normal candy, the GST rate would be 18%, whereas if classified as an Ayurvedic preparation, the rate would be 12%.
This is not the first time that the classification of Hajmola has been debated. In the past, the Supreme Court and the Allahabad High Court have ruled in favor of classifying Hajmola as an Ayurvedic medicine. In 2002, the Supreme Court dismissed an appeal filed by the Commissioner of Central Excise, Chandigarh, which had challenged a ruling by the Central Custom, Excise & Gold Appellate Tribunal (CEGAT) that Hajmola Tablets are Ayurvedic medicines.
Similarly, in 2016, the Allahabad High Court ruled that Hajmola, Chyawanpras, and Hajmola Candy are medicines for tax purposes. The court noted that Dabur India had manufactured these products under a license granted by the licensing officer of Ayurvedic and Unani Services under the Drug and Cosmetics Act, 1940. The court held that the place of sale of a product is not a relevant criterion for determining its nature, but rather the license under which it is manufactured.
The DGGI’s show-cause notice to Dabur is the latest development in the case, and the company has been asked to respond to the notice. The issue of misclassification is not limited to Hajmola, as a similar case is pending in the Bombay High Court regarding the classification of donuts by a Mumbai-based chain, MOD. The chain had allegedly misclassified its donuts as restaurant services, paying a 5% GST rate instead of the 18% rate applicable to bakery items.
The classification of Hajmola and similar products has significant implications for the taxation of these products. The GST rate applicable to these products will depend on whether they are classified as Ayurvedic preparations or normal candies. The outcome of the DGGI’s investigation and the response of Dabur to the show-cause notice will be closely watched, as it will have a bearing on the taxation of these products and the industry as a whole.