Ambiguity over lassi, pooja samagri, vibhuti and others in GST product grouping

As India strives to adjust to Goods and Services Tax (GST), ambiguity continues to remain on certain issues ranging from figuring out the HSN (harmonized system nomenclature) codes of some items, to tweaking tax rates, based on industries' demand.

“There are lot of typical Indian things that don’t have a matching HSN. There is no comparison in the HSN (fit into a particular tax rate under Goods and Services Tax). But we need to fit them somewhere,” Central Board of Excise and Customs (CBEC) Chief Vanaja N. Sarna told Moneycontrol.

“One such item is definitely lassi. Similary, there is pooja samagri, such vibhhuti. Finding comparative HSN for such item will be difficult,” Sarna said.

HSN is an international customs organisation-derived code, which is used to classify goods for the purpose of taxation.

There could be clarity on these issues after the Goods and Services Tax (GST) Council meet next week to iron out issues related to rates and come up with clarification.

A change in rate of a particular item, however, is not something that government in keen on, Sarna explained, until something has been left out.

“Unless there is a serious anomaly, we will not be looking at rates. It can’t be that you are looking at rates every month (during every GST Council meeting), unless there is a mistake,” Sarna said.

Apart from representations from the industry, the government may also re-look certain rules pertaining to GST.

Even though government has come up with 18 notifications, providing interpretation of the tax rate for various commodities, the industry is still awaiting clarity on couple of more product and service categories.

For instance, an inverter, when used by solar power plant, falls under the 5 percent bracket, while a 28 percent tax will be imposed if  it used by any other plant. Different rates for same product makes it difficult to implement.

“In fact there is no way to establish where it is being used (in case of inverters),” Pratik Jain, Partner and National Leader, Indirect Tax at PwC India said.

Similarly, it is not clear whether food for pets will be taxed at zero percent or 18 percent as there are different interpretations of this particular category of item.

The textile industry is still pinning hope on a zero percent tax on fabrics. Textile traders in Gujarat had been protesting to roll-back the 5 percent rate fixed by the Council last month.

However, last week Finance Minister Arun Jaitley said that “Nil GST on fabrics will break the input tax credit chain and then the garments/made ups manufacturers will not be able to get the credit of tax on previous stages”.

“Generally, the GST rates are equal or lower than the pre-GST tax incidence. And therefore, the price of fabrics is not likely to go up,” Jaitley had said.