How much do we tax oxygen? GST code isn’t clear

Mumbai: As several societies, companies and individuals rush to buy oxygen cylinders and sanitisers amid the coronavirus pandemic, companies manufacturing these are faced with a product categorisation issue under the goods and services tax regime. So, what is oxygen, which is mostly sold in containers: just air, an essential item, a medication or a product like a deodorant? Also, what should be the GST for sanitisers — 12% as charged on medicaments, or 18% like other consumer products.The Covid-19 pandemic seems to have brought back the pertinent question of goods categorisation under GST framework. In many cases, the GST rate paid on the same product by different manufacturers is different.“There is confusion on taxation around medical-grade oxygen which is taxed at 12% and other oxygen which is taxed at 18%. Rate rationalisation is imperative after 3 years to reduce classification litigation," said Abhishek A Rastogi, a partner at Khaitan & Co.76501550This comes at a time when orders by the Authorities for Advance Ruling (AARs) in the past one month seem to have added to the confusion on several products, such as paratha and ice-creams. In another recent ruling, the Rajasthan AAR upheld GST at 18% on mehendi powder on the premise that heena powder qualified as a hair dye. When packed in cones, mehendi triggers only a 5% rate."Ambiguities on classification and multiple rates for similar products and at times depending on the form of supply have accounted for litigation in GST and also under the erstwhile taxes. Contrary AAR rulings from different state advance ruling authorities have compounded the problem. Some of these inconsistencies should either be regularised to ensure certainty for businesses or explicit clarifications be issued by the government,” EY tax partner Abhishek Jain said.There are several categories of products where there is a lack of clarity when it comes to GST rates and many companies are looking to approach the AARs, tax experts say.“There is confusion between categories of cosmetics and medicaments, aerated and fruit-based drinks, edible oil and hair oil, etc. In many cases, companies would be looking for clarity from the revenue department or they could approach the AAR for this,” said Pratik Jain, a partner and leader, indirect tax, at PwC India. Tax experts point out that there was still confusion around several products like online games — whether it's game of chance (28%) or game of skill (18%).Some of the older issues around coconut oil are also set to create problems, say industry insiders.

from Economic Times https://ift.tt/37OUlFp