High Bouquet Spirit Taxable at 12.5% u/s 5(1)(e) of the GVAT Act, No GST Applicable: Bombay HC [Read Order]

In a recent decision, the Bombay High Court has ruled that the High Bouquet Spirit/Extra Neutral Alcohol(ENA)/Rectified Spirit is taxable at 12.5% under Section 5(1)(e) of the Goa Value Added Tax ( GVAT ) Act. The court also said that GST is not applicable to this and it completely falls under the state dominance.

“True it is, then there was some conundrum about whether the goods in which the Petitioner is dealing, cannot be subjected to GST or VAT, but in the wake of the notification issued on 30/6/2017, as far as State of Goa is concerned, which omitted entry no.11 from Schedule ‘C’, made it evidently clear that if it is subjected to VAT/CST, then it must fall within the domain of State” said Justice Ashish S. Chavan and Justice Bharati Dangre.

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A writ was filed by United Spirits Ltd, which challenged the levy of VAT interest on sales of HBS/Rectified Spirit/Extra Neutral Alcohol (ENA) for FY 2019-20 on the ground that there was confusion as to whether products fell under the GST or the VAT.

The state government’s counsel, Advocate General Mr.Devidas Pangam submitted that ‘Rectified Spirit and High Bouquet Spirit’ were listed at item No. 11 of Schedule ‘C’ to the GVAT Act attracting VAT at the rate of 20% on its sale.

He further submitted that on 30/06/2017, the above entry was deleted from Schedule ‘C’ and items not covered under GST Act and not specified in any Schedule of the VAT, were liable to VAT at the rate of 12.5% under Section 5(1)(e) of the VAT Act and thus, HBS/ENA become liable to VAT at 12.5%.

The Goods and Services Tax went into effect on July 1st, 2017. According to Mr. Pangam, at the 20th GST Council meeting on August 5th, 2017, it was decided to maintain the status quo, meaning that ENA supplied for industrial purposes would be subject to 18% GST until an opinion was received from the Attorney General of India.

He would contend that the petitioner collected VAT but failed to pay it and kept it. In reality, there was no doubt because the petitioner continued to collect VAT and even filed a quarterly return that showed "zero" VAT, even though he had collected it.

It is evident that even though entry number 11 was removed from Schedule "C," it remained within the GVAT Act's regime until it was subject to GST. After the goods and services tax went into effect on July 1, 2017, it was subject to 12.5% VAT under Section 5(1)(e), said the counsel.

The bench noted that the order of the Assessing Officer clearly made it known to the dealer that the spirits are liable to tax at 12.5% in terms of Section 5(1)(e) of the Act and this is so indicated in the order of the AssessingAuthority.

The court, without agreeing with the Petitioner counsel, observed that “on account of uncertainty, the tax is not ‘due’, as we are of the clear view that as per Section 25 and the sequence of events led before us, the tax was due and payable when the return is filed, and in any case, though he was not liable to pay VAT @ 22%, he was covered by the entry in Section 5(1)(e), where he ought to have paid VAT @ 12% and that is how he is subjected to payment of interest by impugned order which is upheld by the Appellate Authority.”

Accordingly, the petition was dismissed.

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