Skip to main content

Coffee-Toffee, the GST Debate Continues

Hundreds of crores of rupees in the form of taxes ride on the exact categorisation of products
Is Parachute hair oil or edible oil? Is KitKat a chocolate or a biscuit? Is a Vicks tablet medicament or confectionery? For the taxpayer and the tax collector, this is much more than an exercise in semantics -hundreds of crores of rupees ride on the exact categorisation.
As the government moves closer to rolling out the goods and services tax (GST) on July 1, many such distinctions are being debated so that no ambiguity remains. Not just that, the government is revisiting old tax cases that were lost over product categorisation, according to people with knowledge of the matter, presumably with a view to making sure that revenue collections can be maximised.
“In the past, several tax officers had challenged some of the product categorisations, including those in the retail segment, but lost out in court or at appellate level,“ said one of the persons. “Now we have a chance to go ahead with specifying the products in a way based on the old cases so that similar situations don't arise.“
It is understood that the product categorisation exercise, which was expected to have been completed last year, is taking much longer because of this process. The rates have already been decided -nil, 5%, 12%, 18% and 28% --but product categorisation is yet to be finalised.
“The GST rates for each and every item are not yet decided as the government is categorising products and what rates can be applied on each category of goods,“ said MS Mani, senior director, Deloitte Haskins & Sells. “There is a chance that some of the old issues raised by the tax department regarding category of certain goods may come back to haunt some companies or products as GST is a new law and can redefine rates and what goods would fall under its preview.“
Some states have also raised issues on this front, Kerala being a case in point. During a re cent closed-door meeting on product categorisation, finance minister TM Thomas Isaac brought up a point highly pertinent to people of that state.
Coconut oil shouldn't be categorised as hair oil but as edible oil, he is reported to have said. The reason? Edible oil and hair oil are taxed differently as the latter is not an essential commodity. But coconut oil is an essential ingredient of Kerala cuisine, making its categorisation a matter of keen public interest for the state's people.
Key past cases are being researched by the GST committee before it decides on the exact tax rates for each category , said the people cited above. This could mean disputes that many companies thought had been resolved coming back to life. Whether such moves will be challenged or not y the companies is yet to be seen. However, ex by the companies is yet to be seen. However, experts said this may be difficult since GST is a new tax regime altogether and old rulings may not have the force of precedent. Some of the old cases being examined involve Marico, P&G, Nestle, Paras Pharmaceuticals and Dabur, according to the people with knowledge of the matter.
For the record: KitKat is a biscuit and Vicks a medicament. In the KitKat case -Nestle (India) Ltd vs Commissioner of Central Excise, Mumbai, 1999 -it was ruled that the product was a biscuit and not a chocolate, which is taxed at a higher rate.
Meanwhile, companies are lobbying the government to categorise biscuits as essential products under GST, which would mean their being taxed at a lower 5%.
Economic Times New Delhi,25th March 2017


Popular posts from this blog

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…