The Telangana bench of the GST-Authority for Advance Rulings (AAR) has held that, merely because ayurvedic products such as hair oil, conditioners, face serums, et al, are manufactured under licences issued by AYUSH, these cannot be classified as medicaments. While medicaments are subject to a lower goods and services tax (GST) of 12%,  cosmetics attract a higher rate of 18%.

In this case that was heard by the AAR, Hyderabad-based private company IncNut Lifestyle Retail had obtained an AYUSH licence for each of its products. Thus, it contended that all products would be classified as ‘ayurvedic medicaments’ entitled to the 12% GST rate. The AAR bench held otherwise and classified its products into two categories — medicaments and cosmetics — based on the purpose for which they were used.

The AAR bench analysed various decisions, including that of the Supreme Court in the context of excise laws. The tenet set by the apex court decisions was that if a product's primary function is ‘care’ and not ‘cure’, it is not a medicament. Cosmetic products are used in enhancing or improving a person’s appearance or beauty, whereas medicinal products are used to treat some medical condition. A product that is used mainly in curing or treating ailments or diseases and contains curative ingredients — even in small quantities — is to be branded as a medicament.

The AAR bench sought to classify products of the applicant either as a cosmetic or medicament using three primary parameters. As all its products had a drug licence (AYUSH) and contained medical (ayurvedic) ingredients, the key differentiator was the purpose for which the product was used — the label provided insights into this aspect.

Thus, products such as Jeevath Root Stimulating Hair Oil, Vartha Hydrating No-Frizz Hair Conditioner, and various face serums were classified as cosmetics. But other products such as Shastra Oil Pulling Oral Care Oil, which besides strengthening teeth & gums also reduced tooth sensitivity & removed dental plaque, and an anti-dandruff serum that cured the medical condition of sedorrhoeic dermatitis, were treated as medicants entitled to a lower GST rate.

Source: The Times of India 
https://timesofindia.indiatimes.com/business/india-business/cosmetic-ayurved-products-face-higher-18-gst-aar/articleshow/94311538.cms

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