Ayurvedic products are classifiable under Heading 3304 as cosmetics & taxable at 18%: AAR

Case Details: Authority for Advance Rulings, Telangana Incnut Lifestyle Retail (P.) Ltd., In re - [2022] 142 taxmann.com 339 (AAR-TELANGANA)

Judiciary and Counsel Details

• • B. Raghu Kiran & S.V. Kasi Visweswara Rao, Member

Facts of the Case

The applicant was in the business of manufacturing hair oil, shampoos etc., some of which were cosmetics and others ayurvedic medicaments. It filed an application for advance ruling to determine classification of products manufactured under the licences issued by AYUSH department of Government of Telangana and sold as ayurvedic products.

AAR Held

The Authority for Advance Ruling observed that the products referred by the applicant would be classified as cosmetic whose primary function would be care and not cure as they would be used for enhancing-improving a person’s appearance –beauty. On the other hand, the product would be treated as medicament if used to treat or cure a medical condition by adopting the following parameters:

a) The product should have a drug license.

b) The Composition of the product should have medical ingredients.

c) The product label/character should indicate the function or the purpose for which it is used

By applying the above parameters, it was held that if the products would be used for care would be treated as ‘Cosmetics’ and classifiable under Heading 3304 which shall be taxable at 18%. However, ayurvedic products used for cure would be in nature of medicaments and classifiable under Heading 3003 which would be taxable at 12%.