Cosmetic Ayurveda Products Attract Higher GST Of 18%: AAR
The Telangana bench of the GST-Authority for Advance Rulings (AAR) has stated that just because ayurvedic products like hair oil, conditioners, face serums, etc. are manufactured under AYUSH-issued licenses, they cannot be classified as medicaments
The Telangana bench of the GST-Authority for Advance Rulings (AAR) has stated that just because ayurvedic products like hair oil, conditioners, face serums, etc. are manufactured under AYUSH-issued licenses, they cannot be classified as medicaments.
Medicaments attract lower goods and services tax (GST) of 12 per cent, whereas cosmetics attract a higher rate of 18 per cent. This particular case being heard by AAR, involved IncNut Lifestyle Retail which had obtained an AYUSH license for all its products. Hence, it contended that all these products would be classified as ‘ayurvedic medicaments’ and would be entitled to the 12 per cent GST rate. The AAR bench did not agree and stated that products are categorised into two - medicaments and cosmetics, which are based on the purpose of usage.
Various decisions were analysed by the AAR bench, which also included that of the Supreme Court in the context of excise laws. The apex court decisions had set the tenet that ‘if a product’s primary function is ‘care’ and not ‘cure’, it is not a medicament. The usage of cosmetic products is for enhancing or improving a person’s appearance or beauty, whereas the usage of medicinal products is for the treatment of medical conditions. Hence, a product that is used mainly in curing or treating ailments or diseases and contains curative ingredients, even in small quantities, is to be branded as a medicament.’
The AAR bench sought for the product classification of the contender as a cosmetic or medicament using three primary parameters. Since its products had the drug licence (AYUSH) and contained medical (ayurvedic) ingredients, the key differentiator to be considered would be the purpose of usage, for which, the label provided insights into this aspect.