CBIC to Reclassify certain items to make things clear under GST

In context of classification disputes, the Central Board of Indirect Taxes and Customs (CBIC) intends to compile a list of goods that are involved in litigation. The fast-moving consumer goods (FMCG) industry, which has recently received a lot of tax notices, is one area where tax obligations are unclear due to the fitment committee’s apparent investigation of items with slight compositional differences but different tax slabs. And the list will be sent to the ministers on the rate rationalization committee during the next GST Council meeting, as per people aware of the case.

As per a tax expert, the fitment committee is working on the detail list where there is an uncertainty and which has drawn the most litigation. “Classification issue is a problem with some products.”  In accordance to the official, there are twenty to thirty different goods and services where there is overlap in classification.

Finance Minister Nirmala Sitharaman showed the matter in her meeting with enforcement officials of central and state goods and services tax and seeks for the board to fix the classification-related problems on a “priority” basis.

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“The proposal will be referred to the group of ministers on rate rationalization when the council meets next,” the official stated, adding that the fitment committee is currently investigating the issue.

In November of last year, a number of FMCG companies that used the “extruded” method to make chips and Namkeens were asked to file 18% GST instead of 12% and received tax notices requiring them to file the outstanding amount by March 31, 2024. Extrusion is a food processing technique that produces “puffed” or “expanded” snacks that are ready to eat. Starches or cereal flour are the primary ingredients used to make extruded snacks. They are considered harmful because they are low in protein and high in calories and fat.  Any snacks made through the extrusion process must be taxed at 18%, according to the centre in August 2023, and notices from the Directorate General of GST Intelligence (DGGI) were discovered in response to this clarification.

Bhujia is normally subject to a 12% GST tax, but most producers now use the extrusion process to lower the product’s fat content. Many traditional bhujia makers are now facing increased tax demands due to this, creating an uncertain situation, according to a Namkeen manufacturer who wished to remain anonymous. Without a definition, the industry asks the government for clarification, especially now that numerous businesses have received DGGI notices.

Ahead of the upcoming due dates, the FMCG industry filed a detailed representation with the finance ministry, requesting a solution to avoid unnecessary litigation and notices.

Read Also: GST appellate tribunal benches at 50 new locations soon: Revenue Secretary
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