Introduction
In the realm of taxation and regulatory compliance, the classification of products holds immense importance, as it determines the tax treatment and regulatory obligations. In a recent case, an applicant sought an advance ruling to determine whether their product, JAC OLIVOL BODY OIL, should be classified as a medicament or a cosmetic under the Goods and Services Tax (GST) Act. This article delves into the details of the case and the findings of the authority.
Background
The applicant intended to produce JAC OLIVOL BODY OIL, which they claimed to be an Ayurvedic patent and proprietary medicine. The key question at hand was whether this product fell under the category of medicaments or cosmetics for tax classification purposes. The answer to this question would have significant implications for the GST treatment of the product.
Key Submissions of the Applicant
The applicant argued that JAC OLIVOL BODY OIL should be classified as a medicament, primarily based on the following points:
Ingredients: All the ingredients used in manufacturing the product were mentioned in the Ayurvedic pharmacopoeia and authoritative textbooks of Ayurveda, approved by the Drug Controller.
Therapeutic Herbs: The ayurvedic herbs used in the preparation of the oil had therapeutic properties meant to be applied on the body and not consumed orally.
Curative Properties: The product was designed to cure dry skin, heal wounds, reduce chronic muscle pain and joint pain, and had properties like anti-ageing and anti-wrinkling due to its herbal composition.
Preventive Value: The product had substantial curative or preventive value and was primarily used as a pain relief oil and for treating, mitigating, curing, or preventing skin ailments.
The applicant also relied on various legal judgments to support their claim.
Authority's Observations and Findings
The authority carefully considered the arguments presented by the applicant, as well as the relevant legal provisions and precedents. The key findings and observations of the authority are as follows:
Classification Criteria: The authority emphasized that the classification of a product as a medicament or cosmetic should primarily be based on its intended use. The common parlance test, which considers how consumers perceive and use the product, was recognized as a critical factor in making this determination.
Product Label: The label of JAC OLIVOL BODY OIL indicated its primary use for skincare, with phrases like "For soft, smooth, glowing, and healthy skin." The product was also recommended for daily application before or after bathing.
Market Description: Product descriptions on various marketing platforms reinforced the notion that the primary use of the product was for skincare.
Common Understanding: The authority concluded that the product, as commonly understood, was a preparation for the care of the skin and did not serve as a medicament for treating or preventing diseases or ailments.
Legal Precedents: The authority cited the precedent set by the Supreme Court, emphasizing that a product's subsidiary curative or prophylactic value did not automatically classify it as a medicament if its primary function was not treatment but care.
Conclusion
Based on its findings and analysis, the authority ruled that JAC OLIVOL BODY OIL should be classified under Heading 3304 of the Customs Tariff Act. Consequently, the product would be taxed accordingly under the GST Act as a cosmetic.
This ruling highlights the importance of considering a product's primary intended use and common understanding when determining its classification for tax and regulatory purposes. In this case, despite having some therapeutic properties, the product's primary function as a skincare preparation led to its classification as a cosmetic. Such cases serve as a reminder of the complexities involved in classifying products under tax and regulatory frameworks, emphasizing the need for clarity and adherence to legal precedents.
Topic-Indranil Chatterjee
Court-WEST BENGAL-AAR
Date-10/08/2023
Team Taxonation
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