TaxTMI 
TaxTMI 
Rate classification
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....ate classification<br> Query (Issue) Started By: - Shrikanth Parmarthy Dated:- 12-5-2025 Last Reply Date:- 15-5-2025 Goods and Services Tax - GST<br>Got 5 Replies<br>GST<br>Dear experts, Facts: 1. There is ambiguity in the industry relating to rate classification of a particular product. The industry is of the view of applying a HSN where the GST rate is lower whereas the GST department is contending a HSN where GST rate applicable will be higher than the one claimed by Industry 2. There a 2 high court decisions where rate of the product is passed in favour of the Industry. Against one of the high court decision the GST Department has approached the supreme court and court has rejected the plea made by department. Queries: 1. Should th....
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....e industry wait for the GST council/CBIC to release a rate amendment notification based on the Supreme court rejection as mentioned above. OR 2. Should the industry proceed with apply the HSN with lower GST rate based on the supreme court rejection. Kindly provide your inputs on how to proceed further. Reply By KASTURI SETHI: The Reply: Dear Querist, In this context, you should wait for CBIC's Circular. Whether to file review petition or accept the Order of Hon'ble Supreme Court is to be decided by CBIC after approval from the Ministry of Law, Govt. of India. If accepted, the CBIC will issue circular as usual. Reply By YAGAY andSUN: The Reply: In this scenario, there are a few important considerations that can guide th....
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....e industry's next steps. Let's break down your queries: 1. Should the industry wait for the GST Council/CBIC to release a rate amendment notification based on the Supreme Court rejection? * Uncertainty & Delays: Waiting for a formal notification from the GST Council or CBIC could take a while. The process of issuing such a notification can sometimes be slow, and there's no guarantee that the council will promptly take action based on the Supreme Court's rejection. * Dependence on Legislative Action: Notifications issued by the GST Council or CBIC are typically binding and authoritative. However, in this case, the Supreme Court has already given its judgment, which provides significant clarity. The court's decision often takes prece....
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....dence over administrative notifications, so the industry may not need to wait for a new notification. * Risk of Retrospective Adjustments: The industry should be cautious of any potential retrospective amendments that might come after they have proceeded with their own interpretation. If the GST Council decides to issue a new rate notification in line with the Supreme Court's ruling, that would provide formal clarity, but it could take time. 2. Should the industry proceed with applying the HSN with the lower GST rate based on the Supreme Court rejection? * Supreme Court Judgment as Precedent: Since the Supreme Court has rejected the GST Department's plea, this essentially means that the higher rate under the department's suggested ....
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....HSN classification is not valid. Therefore, the industry is within its rights to proceed with the lower rate, especially if the High Court's earlier decision was in favor of this classification. * Legal Precedent: The High Court ruling, supported by the Supreme Court's dismissal of the department's appeal, creates a strong legal precedent in favor of the industry's position. This makes it relatively safer for the industry to apply the lower GST rate, as the law (based on the court's interpretation) supports this. * Risk of Dispute: However, there is always the risk of further scrutiny or action from the GST Department. The department may still take action, especially if they believe there is ambiguity in the classification. If they ....
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....proceed with an audit or issue a notice, the industry can defend its position based on the court rulings. Recommendations: * Proceed with the Lower Rate: Based on the Supreme Court's rejection of the GST department's appeal, and considering the favorable High Court rulings, the industry can reasonably apply the HSN code with the lower GST rate. The legal position is clearly in their favor. * Document the Legal Precedents: It would be prudent for the industry to keep detailed documentation of the High Court rulings and the Supreme Court's rejection to ensure they have a strong defense in case of any future scrutiny by the GST Department. * Monitor for Notifications: While they don't necessarily need to wait for a notification,....
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.... it's wise for the industry to keep an eye on any official updates from the GST Council or CBIC, as a formal rate amendment may be issued in the future. If a notification is issued that conflicts with the Supreme Court's decision, the industry would need to reassess. * Consider Legal Advice: In complex matters like this, it could be beneficial to seek legal counsel to ensure full compliance and to further clarify any risks the industry may face, particularly in case of any future challenges from the GST Department. Overall, the industry is likely safe to apply the lower GST rate as per the court's rulings, but it's essential to stay informed of any new developments or notifications. Reply By Ganeshan Kalyani: The Reply: In case of ....
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....SAFARI RETREATS - 2024 (10) TMI 286 - SUPREME COURT judgement, the Hon'ble Supreme Court has coined the term of 'functionality test' for allowing the input tax credit used in the construction of shopping mall which was intended to let out the units built therein. Here, instead of directly ruling - that input tax credit is eligible or it is not eligible, the Hon'ble Supreme court has put the onus on the person claiming the credit. In another instance, as regard the rate of GST applicable on 'flavoured milk' the Fitment Committee took it as an agenda for discussion but never the point was brought before GST Council for discussion and still the issue is open. Taxpayer classified said item under 5% tax slab and dep....
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....artment prefer 12% GST on said item. Only recently the Hon'ble Supreme Court dismissed an appeal by the Revenue Department against a ruling by the Andhra Pradesh High Court on 5% GST on badam-flavoured milk. In first case, the Hon'ble Supreme Court did not ruled but coined a term 'functionality test'. In the second, it has passed the order clearly. So, before applying the precedence one need to carefully observe the order and take decision accordingly. Reply By Shilpi Jain: The Reply: It is generally not possible to reply to these kind of questions and regard that to apply blanket to all situations. Various other factors have to be considered on case to case basis. You need to check what is the differential tax am....
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....ount involved, whether there is a possibility of collecting it from the customer in future, how strong is the classification by industry and how defendable is it, what is your risk profile, various other factors. So you should either give more facts or approach a consultant on professional basis to decide what has to be done in your specific scenario. Reply By Shrikanth Parmarthy: The Reply: Dear Experts, Thank you all for your valuable reply<br> Discussion Forum - Knowledge Sharing ....