Dabur India's Hajmola in GST soup: 12% or 18% tax rate?

Dabur India's Hajmola candy is under the scanner of GST officials. The Directorate General of GST Intelligence (DGGI)'s Coimbatore zone is investigating whether Hajmola candy should be treated as Ayurvedic medicine, attracting 12% GST, or as a candy, taxed at 18% GST. According to a report by CNBCTV18, Dabur India and DGGI are at loggerheads in this matter.

Earlier, Dabur faced a similar classification challenge in the pre-GST regime. At that time, the Supreme Court ruled in the company's favour. The apex court said Hajmola candy is an Ayurvedic medicine and not a confectionery item.

In another case, the Delhi High Court has directed Dabur India to submit scientific evidence backing claims in its advertisement that fluoride in toothpaste can cause adverse health effects, such as brittle bones, and lower IQ.

This is followed by an application filed by toothpaste maker giant Colgate -Palmolive which asked the court to restrain such claims in Dabur's ad. Colgate-Palmolive said that the claims made by Dabur were misleading and disparaged fluoride-based toothpaste. Colgate has argued that fluoride in regulated amounts (up to 1000 ppm) is approved by health authorities worldwide for preventing tooth decay.

The court has granted Dabur two weeks to file a reply.

Separately, Dabur is also facing tax demand by the income tax authority of Rs 110.33 crore for the financial year 2017-18.

The I-T sleuths allege incorrect claims for tax deductions related to in-house Research and Development (R&D) and under Section 14A of the Income-tax Act, 1961.

The FMCG giant stated that it would challenge the demand.