The West Bengal Authority for Advance Ruling (AAR) has held that Jac Olivol Body Oil is to be classified as a cosmetic product rather than a medicament on the observation that the primary function of the product, which is for the care of the skin and not for the cure, treatment or prevention of diseases. The product shall be liable to Goods and Services Tax (GST) at the rate of 28%.
The applicant, Indranil Chatterjee, sought an advance ruling to determine the appropriate classification and GST rate for their product, Jac Olivol Body Oil.
The applicant stated that the product is intended for the care of the skin and has been in the market for over two decades and is granted a license under Section 3(4) of the Drug and Cosmetic Act, 1940 as an Ayurvedic patent and proprietary medicine.
The applicant, represented by Mr. Ankit Kanodia argued that Jac Olivol Body Oil should be classified under HSN No. 3004, attracting a 12% GST rate based on its therapeutic and prophylactic properties.
The applicant contended that its ingredients have therapeutic qualities, including relieving body aches, joint and knee pains, minor burns and preventing blisters. Additionally, the product has skincare properties such as softening, moisturising and preventing premature aging and wrinkling.
The applicant emphasised that the essential character of the oil is to soften, supple and moisturise the skin when applied, which does not automatically make it a cosmetic product. The appellant also distinguished body oils from face oils, serums and creams, highlighting their primary purpose of hydrating and locking in moisture below the neck.
Heading 3004 of the Customs Tariff covers medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses while Heading 3304 covers beauty or makeup preparations and preparations for the care of the skin (other than medicaments).
The AAR noted that the classification of the product as a medicament or a cosmetic hinged on the product’s use.
The authority found that the primary use of Jac Olivol Body Oil, as indicated on the label and through product descriptions, is for the care of the skin. The product is marketed as a means to achieve soft, smooth, glowing and healthy skin. It is recommended for daily application before or after bathing.
The authority also referred to various judgments, including the recent Supreme Court ruling in Ashwani Homeo Pharmacy, which emphasised that the common parlance test should be applied to determine whether a product is a medicament or a cosmetic. If a product’s primary function is for care rather than cure, it is considered a cosmetic.
The authority observed that the product is commonly understood as a preparation for the care of the skin and not for the treatment or prevention of diseases. Therefore, it should be classified under Heading 3304 of the Customs Tariff Act, attracting a 28% GST rate applicable to cosmetics.
By categorising the product as a cosmetic product, it will be subject to a higher GST rate of 28% instead of the 12% rate that applies to medicaments.
The two-member authority comprising Dr. Tanisha Dutta (CGST Member) and Joyjit Banik (SGST Member) concluded that the product called “Jac Olivol Body Oil” intended to be manufactured and sold by the applicant is not a medicament but a cosmetic product and shall be covered under Heading 3304 of The First Schedule To The Customs Tariff Act and shall be taxed 28% under the GST Act.
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