Ayurvedic products classified as cosmetics or medicaments based on care versus cure function under different HSN codes

The AAR, Telangana classified Ayurvedic products manufactured under AYUSH department licenses based on three parameters: drug license possession, medical ingredient composition, and product function/purpose as indicated on labels. Products used for care were classified as cosmetics under HSN 3304, taxable at 9% CGST and 9% SGST each. Products used for cure were classified as medicaments under HSN 30.04, falling under Serial No. 63 of Schedule II, taxable at 6% CGST and 6% SGST each.

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Issues Involved:
1. Classification of products as Ayurvedic medicaments or cosmetics under HSN 30.04 or HSN 3304 of the GST Tariff.

Issue-wise Detailed Analysis:

1. Classification of Products:

Question Raised:
The applicant sought to determine whether their products, manufactured under licenses issued by the AYUSH department of the Government of Telangana and sold as Ayurvedic products, fall under HSN No. 30.04 (medicaments) or HSN 3304 (cosmetics) of the GST Tariff.

Applicant's Arguments:
- The applicant contended that their products, certified by the AYUSH Department, should be classified as Ayurvedic medicaments eligible for a concessional tax rate of 12% under HSN 30049011, as per Sl.No.63 of Schedule-II of Notification 1 of 2017.
- They relied on various case laws, including a Supreme Court ruling where Vaseline was classified as a medicament and a tribunal order classifying Arnica Hair Oil as a medicament.

Discussion & Findings:
- The applicant categorized their products into six broad types of Ayurvedic products for treatment of hair, dandruff, facial disorders, mouth and oral disorders, hair disorders, and facial skin disorders.
- The Authority for Advance Ruling (AAR) examined whether the products fall under Chapter 33 (cosmetics) or Chapter 30 (medicaments) of the customs tariff code, using principles established by the Supreme Court in various cases.
- The Supreme Court's principles emphasized the importance of the product's curative attributes, its use by consumers, and whether its primary function is "care" or "cure."

Parameters for Classification:
The AAR adopted the following parameters to classify the products:
a) Whether the product has a drug license.
b) The composition of the product, specifically if it contains medical ingredients.
c) The function or purpose indicated on the product label and literature.

Product Classification:
- Products for hair treatment (e.g., Vapra Root Stimulating Hair Oil, Niryath Root Stimulating Hair Oil) were found to have no indication for curing or treating any ailment or disease. They were classified as cosmetics under Chapter 3304.
- Products for dandruff treatment (e.g., Vardhan Pro Hair Regrowth & Anti Dandruff Serum) were labeled as treating a medical condition (dandruff) and were classified as medicaments under HSN 3003.
- Products for facial disorders (e.g., Sthavi Hydro Plenish Moisturizing Face Serum) were found to have no indication for curing or treating any ailment or disease and were classified as cosmetics under Chapter 3304.
- Products for mouth and oral disorders (e.g., Shastra Oil Pulling Oral Care Oil) indicated treatment/cure of a medical condition and were classified as medicaments under HSN 3003.
- Products for hair disorders (e.g., Tarunya Basil Infused Skin Tightening Face Serum) with no indication for curing or treating any ailment or disease were classified as cosmetics under Chapter 3304.
- Products for facial skin disorders (e.g., Rejat Brightening Clay Mask) with no indication for curing or treating any ailment or disease were classified as cosmetics under Chapter 3304.

Ruling:
- The products were classified as either medicaments or cosmetics based on the presence of a drug license, medical ingredients in the composition, and the function or purpose indicated on the label and literature.
- Products used for care were treated as cosmetics and taxed at 9% CGST and SGST each.
- Products used for cure were treated as medicaments falling under Serial No. 63 of Schedule II, taxable at 6% CGST and SGST each.

The detailed product-wise classification was provided in the discussion, with specific products identified as either cosmetics or medicaments based on the established parameters.

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