India’s Differential GST for Coconut Oil, a Similar Move to Pre-tax Regime

The GST Council may have put off a proposal to tax coconut oil sold in pack sizes below one liter at 18% instead of 5% levied on edible oils, but industry observers are puzzled at the idea as similar moves in the pre-GST tax regime had been challenged successfully, The Hindu reported on September 21.  

The Council’s Fitment Committee had recommended that coconut oil, packed and sold in containers less than one liter should be classified as hair oil, and taxed at the 18% rate levied on personal care items, while the 5% GST could continue for the same oil when sold in containers of one liter or more.Tamil Nadu Finance Minister P. Thiagarajan had earlier slammed the GST fitment committee’s suggestion as one made ‘in bad faith’ that was against southern States with particularly adverse effects for poor consumers who may not be able to buy oil in larger quantities. 

It was recalled that in 2009, the erstwhile Central Board of Excise and Customs (CBEC) had issued a circular that proposed to classify small coconut oil packs of up to 200 ml as hair oil, subject to excise duty of 8%, while treating bigger packs as vegetable oil with no excise duty on them. At the time, such smaller coconut oil packs accounted for nearly a quarter of FMCG player Marico’s turnover, and the CBEC circular was issued despite Tribunal benches holding that coconut oil is a vegetable oil. Marico had in the past challenged the move in court and won a verdict in its favor.