It has been nearly four years since the Goods and Services Tax, or GST, was implemented. The GST Council has met dozens of times. Despite this, there is still controversy over the classification of product and service. Businessmen and the government interpret the law in their own way. This is the reason why disputes are increasing rather than decreasing.
Dabur Odomos has been in use for years. At present, it attracts a GST of 18 per cent. It is used as a mosquito repellent. Now the company has questioned its classification and has demanded to declare itself as a medical product which attracts a tax of 12 per cent. However, the Uttar Pradesh Authority for Advanced Ruling (AAR) has rejected this demand. This product of Dabur will continue to attract tax of 18 per cent.
Controversy over product classification
According to a report published in the Times of India, another Noida company questioned the classification in front of UP AAR. The company said that it makes bread cheese, so 12 percent tax should be collected from it. His appeal was not accepted by the Uttar Pradesh Authority for Advance Ruling. A third case is of a bicycle lock. The question in this is whether it should be considered as a bicycle accessory or it should be considered as a lock only. There is a 400 page HSN codebook for product and service classification which has 19 thousand tariff entry. Despite this the problem continues.
Less tax slab is the solution
There have been dozens of such cases where the government and businessmen claim different tax rates. The present government is completely rejecting the single rate of GST, although it is definitely in favor of a lower tax slab, but it is a long term plan. Harpreet Singh of KPMG says that GST has a single tax rate in 49 countries. There are two tax rates in 28 countries. In such a situation, the only way to reduce the problem of classification of the product or service is to reduce the tax slab by the government. At present, the GST Council has no plan for this.
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