The Advance Ruling Authority (AAR) of West Bengal State recently clarified that some Rakhis would attract Goods and Services Tax ( GST ) as the exemption to rakhis would not applicable to all such as, a rakhi using glass beads which attract 18% GST.
Rakhi is a traditional wristband, used in the festival of Raksha Bandhan for depicting a bond between a sister and brother.
The authority said that a rakhi made of only ‘kalaava’, a mixture of cotton threads in the form of red and yellow yarn, would enjoy tax-exempt under the GST regime as its classified under ‘puja samagri’. However, designer rakhi assembled using zari, nylon and silk threads among other items aren’t exempt, the ruling said.
As the item ‘rakhi’ is not specifically mentioned among items in the tariff code under the GST, the AAR bench relied on the interpretation rules provided by the tax research unit (TRU) of the indirect tax department.
A product like rakhi, which is a product of several input without anyone predominant element, would be classified under the heading which is numerically last among headings covering all the components of the product, the AAR said.
“It is seen that “Rakhi” is an independently identifiable product and is also known to be so in common and commercial parlance. The multifarious constituents that go into the making of the “Rakhi” cannot be considered as accessories; the material which provides the essential character to “Rakhi” is varied and the buyer may also be motivated to purchase the same as much for its for its designer/decorative/fancy part, as for its symbolic characteristic of a bond of protection,” it said.
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