Coconut oil 'edible', to invite tax cut

For 15 years, the Supreme Court has wrestled with a slippery question: Is a small pack of coconut oil for cooking or for hair care?

- Utkarsh Anand

NEW DELHI:

The question arose from the category under which the oil should be taxed, and back when the court first heard the case, India's indirect tax regime was built around excise. On Wednesday, when it finally pronounced that a small pack of coconut oil would be considered a cooking oil (unless the pack specifically mentions it is for hair), the regime is built around the Goods and Service Tax (GST). Cooking oil attracts 5% GST as compared to hair care products which attract 18%.

The judgment comes as a relief to manufacturers and consumers alike, bringing clarity to a protracted tax dispute that had tied up courts, government departments and industry stakeholders since 2009. At the heart of the debate was how to categorise a product widely used for both culinary and cosmetic purposes and whether the size of the container dictates the oil's purpose.

The revenue department argued that small packs of coconut oil are primarily purchased as hair oil, citing market surveys to back its claim. It contended that packaging and marketing strategies are pivotal in determining usage, advocating for an 18% GST classification under hair care products.