GST Intelligence Wing To Check Tax Evasion By Hand Sanitiser Manufacturers

New Delhi, 8 Jul 2020:

The goods and services tax (GST) intelligence wing will check tax evasions by hand sanitiser manufacturers across India, according to government sources.

The Directorate General of Revenue Intelligence (DGGI) has issued a letter to principal chief commissioner/chief commissioner to check evasion of GST by manufacturers of alcohol-based hand sanitisers, government sources told CNBC-TV18.

DGGI sources said, "DGGI first did a few operations against many units and after finding major irregularities, DGGI then sensitised the CGST field formations. It is difficult to guess total amount of evasion so far, but it is estimated to be substantial."

"Mis-classification of hand sanitizers produced under various established brands is also being looked into by various zonal units of DGGI", according to the letter reviewed by CNBCTV18

They, requesting not to be named, said the letter was written on June 10. DGGI took note of a Central Economic Intelligence Bureau letter and opinion of World Customs Organisation (WCO) to step up vigil, they say.

The DGGI explains that due to mis-classification of hand Sanitisers (alcohol based), sugar mills and distilleries were filing tax under tariff heading 3004 (12 percent GST) instead of heading 3808 (18 percent GST).

According to the sources, the DGGI suspects a substantial GST evasion.

A list of 62 manufacturers/suppliers have been prepared by the DGGI headquarters by identifying manufacturers with the help of online shopping platforms like Amazon, Flipkart, Snapdeal, PayTm, etc. is also being analysed, they told CNBC-TV18.

Rajat Mohan, senior partner at AMRG & Associates, said, "Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses or in forms or packings for retail sale, including Ayurvaedic, Unani, homoeopathic siddha or Bio-chemic systems medicaments, put up for retail sale are chargeable with GST @12%."

"Factually speaking Chapter 30 relates to pharmaceutical products and HSN 3004 pertain to “Medicaments”, which basically signal supply of medicines for some disease. Categorising Alcohol Based Hand Sanitizers by sugar mills and distilleries as a pharma product seems to be little overstretch of imagination, whereby companies actually have created a colorable device to systematically evade taxes. It is expected that such action by taxpayers will be charged with malafide intention leading them to pay tax with interest @ 18% and applicable penalty," Mohan said.

"Also, this is a massive drive, mis-classification is often used as a common modus operandi for evading taxes. However, we don't know whether the mis-classification is by mistake or due to some missing clarity in the law and whether all manufacturers were carrying out evasion or just the ones linked to sugar mills and distilleries, it is to be seen," he added. CNBC TV18