SC: Homoeopathic hair oil entitled to lower tax rates

Mumbai, May 5, 2023

In its recent order, the Supreme Court (SC) has held 'Aswini Homeo Arnica Hair Oil' to be a medicament and not a cosmetic or toilet preparation. Thus, it would attract a lower excise duty rate at 6% as opposed to cosmetics, which are subject to a higher rate of 12%.

The same tenet will also hold under the current goods and services tax (GST) regime. It may be recalled that earlier the Telangana bench of the GST-Authority for Advance Rulings had classified AYUSH-certified ayurvedic products into medicaments and cosmetics. While the former attracts a lower GST of 12%, cosmetics attract a higher rate of 18%. TOI had covered this ruling, given in the case of IncNut Lifestyle Retail, in its edition on September 20, 2022.

The SC held Arnica hair oil fits the corners of the twin test perfectly, which is both the common parlance test and the ingredients test. In its order running into over 70 pages, the SC stated that even if the expression 'hair oil' appear on the label, the expressions 'homeo' and 'Arnica' preceding the expression 'hair oil' could not have been ignored and left aside by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

At the tribunal level, the product was held to be a cosmetic - one of the reasons being that hair growth was at best a cosmetic necessity rather than a disease. Further, the package was labelled as 'hair oil' and depicted a lady with long black flowing hair.

Harpreet Singh, indirect tax partner at KPMG-India, explained, "Correct tax classification can be determined by looking at all principles such as end-use, common parlance, principal purpose test and ingredients." Reduced tax slabs will help overcome litigation, he said.

[The Times of India]