Hyderabad: The Telangana High Court recently ruled that five ayurvedic products – Navratna oil, Gold turmeric cream, Boroplus antiseptic cream, Boroplus prickly heat powder, and Sona chandi chyawanprash – produced and marketed by Himami and Emami companies are classified as drugs, not cosmetics.
The court rejected the Revenue Department’s appeals and upheld the assessee’s (Himami and Emami) view that these products are medicaments (drugs) and not cosmetics under the Andhra Pradesh General Sales Tax Act, 1957.
The court examined the composition, marketing claims, and regulatory licenses of the products, and found that they have predominant medicinal properties and therapeutic benefits, rather than being mere cosmetic or toiletry products.
This ruling will help these two companies reduce their tax burden, as drugs are subject to a 10% GST rate compared to the 20% rate for cosmetics.
The dispute began in the assessment year 1996-97, when the commercial taxes wing of the state started treating these products as cosmetics and levying a 20% sales tax on them.
After hearing both parties extensively and examining the issue thoroughly, the division bench of Justices P Sam Koshy and N Tukaramji concluded that the five products fall under the category of drugs.
The dispute also involved six other products, including Nirog dant powder lal, being manufactured and marketed by the two companies. The tax officials had classified these products as cosmetics and levied a 20% tax on them.
The sales tax appellate tribunal (STAT) ruled that dant powder is a cosmetic product, not a medicament. This finding was not challenged by the companies involved and was accepted by them.
