WBAAR confirms 12% GST on Ayurvedic Patent and Proprietary Medicine

The West Bengal Authority of Advance Ruling (AAR West Bengal) in the matter of Indranil Chatterjee has levied 12% GST on Ayurvedic Patent and Proprietary Medicine.

The applicant intends to produce JAC OLIVOL BODY OIL classified as an Ayurvedic patent and proprietary Medicine and inter alia the applicant is in the advanced stages of entering in to contract manufacturing agreement with the trade name owners of the said product.

The Appellant sought an advance ruling under section 97 of the West Bengal Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017, (hereinafter collectively referred to as “the GST Act”) seeking as to the classification of the namely JAC OLIVOL BODY OIL which as per the appellant is classifiable under HSN 3004 as a medicament attracting GST at the rate of 12% (6% CGST and 6% WBGST).

In the instant case, it is pertinent to refer to the relevant portion of the judgment passed by the Hon’ble Supreme Court of India in the case of Commissioner of Central Excise vs. Baidynath Ayurwed Bhawan Ltd, as already referred to in para 4.

Again, in Alpine Industries vs. Collector of Central Excise, New Delhi, [(2003) 3 SCC 111], the Hon’ble Supreme Court has observed:

Any subsidiary therapeutic or prophylactic use of the product would not change its nature as “Hair oil”, if in the common parlance, it is treated as a cosmetic.

Thus, the entire issue of whether the instant product is to be classified as a cosmetic or a medicine mainly rests on the twin tests as referred to in para 4.

The appellant has submitted soft copies of The Ayurvedic Pharmacopoeia of India, Part I Vol. I and Part I Vol. II published by the Department of Ayush, Ministry of Health and Family Welfare, Government of India as annexures to his additional submission wherefrom it appears that various ingredients of the instant product i.e. Haridra, Manjistha, Arjuna, Daruharidra, Karpoor, Neem Oil etc. are covered under such Ayurvedic Pharmacopoeia of India as Ayurvedic ingredients.

Now, comes the first leg of the afore-stated ‘twin test’ i.e. whether in common parlance the item is accepted as a medicament?

Taking the example of Haridra or Turmeric – the same goods are used for therapeutic or prophylactic purposes but at the same time it is widely used all over India as a spice and condiment being one of the primary ingredients of cooking. Similarly, Karpoor or Camphor not only has its uses to treat skin conditions, improve respiratory function, and relieve pain but also as an insect repellent and moreover for the purposes of puja and aarti. So, here naturally the question comes, what is the identity of these goods in the minds of general people in common parlance? As for example, The Ayurvedic Pharmacopoeia of India, Part I Vol. I and Part I Vol. II as referred to by the appellant even have entries like Atasi or Linseed whose oil is primarily used in artists’ oil paints, Dhanyaka or Corriander, Jatiphala or Nutmeg and Hingu or Asafoetida which are widely used in cooking, Aksoda or Walnut and Dadima or Pomegranate which are commonly savoured as fruit and nut, Iksu or Sugarcane which is mainly used for the production of sugar all through the world.

The appellant while presenting his case before this Bench argued that in most part of our country, people have been applying mustard oil to keep the skin hydrated but that does not make mustard oil a cosmetic product.

In a similar line, if it is asked whether in common parlance, whether applying mustard oil to keep the skin hydrated makes it a medicine, it will land into an answer as per common parlance that mustard oil is primarily a cooking medium.

The appellant has stated that the instant product can be used for treating minor burns and prevents blisters. Now, in light of ‘common parlance’, if we ask – what will be the requirement of someone in case of treating a minor burn – an anti-burn ointment or an instant product, the answer would tend to the former option.

Now, the issue of therapeutic i.e. relating to the healing of disease or prophylactic i.e. intended to prevent disease of the product comes in question. Also, a valid question comes regarding the issue of cure vs. care. As submitted by the appellant, Jac Olivol Body Oil has certain skin care properties. It can be used in winter for curing dry skin and also has its use for curing body aches. Now, dry skin can occur normally due to loss of skin moisture in the winter season or misuse of external agents like soap. At the same time, it can occur due to skin diseases like atopic dermatitis (eczema) or psoriasis. Now, as we all know any body-oil like mustard oil, coconut oil or olive oil has a natural property to retain skin moisture resulting in the minimization of dry skin. But that does not necessary imply that mustard oil, coconut oil or olive oil can cure skin diseases like eczema or psoriasis. In the same way, as claimed by the appellant, the product Jac Olivol Body Oil can be used to relieve body aches and joint and knee pains. It is a well accepted fact that a body massage using any body oil like mustard oil, coconut oil or olive oil can give relief to body spasm and aches. But at the same time, pain and aches arising out of arthritis, tendinitis, gout, spondilitis etc demand specified medical treatment with medicines. Thus, there is a wide gap between the words ‘cure’ and ‘care’ so far as the instant product is concerned.

The same theory has been promulgated in the case of Commissioner of Customs, Central Excise and Service Tax, Hyderabad versus Ashwani Homeo Pharmacy (Civil appeal No. 9525 of 2018 dated 03.05 .2023), where the Hon’ble Supreme Court has observed:

… when the preparation is for cure or prevention, it would be medicament but, if only for care, it would be cosmetic. Of course, cosmetics would not become medicament even if having subsidiary curative or prophylactic value, as held by this Court in Alpine Industries (supra).[emphasis added]

In view of the above discussions, it can be opined that the product Jac Olivol Body Oil intended to be manufactured and sold by the applicant shall not be covered under Heading 3004 of the First Schedule to the Customs Tariff Act as appealed for. Instead, it would get covered under Heading 3304 of the First Schedule to the Customs Tariff Act and would be taxed accordingly under the GST Act.

The WBAAR Ruling No. 19/WBAAR/2023-24 dated 10.08.2023 is confirmed and the Appeal stands rejected.

As the members of the West Bengal Appellate Authority for Advance Ruling differ on the classification of the instant product i.e. ‘JAC OILVOL BODY OIL’, it is deemed that no Advance Ruling can be issued in respect of the questions under appeal as per the provisions of Section 101 sub-section (3) of the GST Act. Thus the Advance Ruling No. 19/WBAAR/2023-24 dated 10.08.2023 is deemed to be not in operation.

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