Web Analytics
Back to home

Automobile companies required to pay 28% GST on imported plastic products

By Vikram Narula

The Customs department has commenced issuing notices to several automobile manufacturers requiring them to pay Goods and Service Tax (“GST”) at the rate of 28% instead of 18% towards imported plastic goods such as ashtrays, floor mats etc.

While plastic products attract 18% GST, they are being utilized as auto components that attract 28% GST. This raises a question whether separate tax rates can be levied on the same product which is imported by two different companies, depending upon their end use respectively. This appears to be the rationale of the customs department, going by the latest tax demand being imposed on automobile manufacturers. Many automobile manufacturers are being questioned by the customs department for this reason and many others are also under the scanner and may also receive similar notices in the times to come.

In the month of July this year, the automobile industry has witnessed a significant dip in close to nineteen years in their sales. This new tax demand will further add to the plight of automobile manufacturers.

The present issue pertains to classification under GST. The conventional practice being followed previously was to finalize the classification of plastic goods which are used for cars. This practice was even accepted by the customs authorities. It is just recently that the department has taken a different view.

As per the customs regulations, the department is required to levy tax based on the place and the form of goods imported. They department does not have the instructions to verify their end use respectively. For example, several products such as plastic ashtrays could face different taxes depending on the person importing them. Applying such rationale, it appears that a company in the hospitality sector may be required to pay lesser tax than an automobile manufacturer for the same product.

There are several goods which may be having multiple use. It is for this reason that companies are also opting for standardization, which implies that such goods may also have multiple end use as well.

As the way forward, it will be essential that companies examine both, the chapter and section notes of various products prior to deciding the classification of the concerned/relevant product(s) and the corresponding duty on such products. This will be a proactive approach to avoid unnecessary litigation.

It may be inferred that this new step may be extended to several other products and industries which may also affect the sectors which are anyway suffering losses.

For more information please contact us at : info@ssrana.com



This website https://www.ssrana.in (hereinafter referred to as the “website”) is a public resource website and provides general information about the location of the firm S.S Rana & Co. Current Rules of the Bar Council of India do not permit lawyers to solicit work or advertise their services. The website is a resource website for non-commercial, general informational and educational purposes only and there has been no advertisement, personal communication, solicitation, invitation or inducement of any kind whatsoever from S.S.Rana & Co., or any of its members, to solicit any work or create an Attorney-Client relationship through this website.

Although every effort is made to update this website and provide its visitors /users with accurate, updated and latest information, S.S Rana & Co. does not guarantee or undertakes any warranties concerning the accuracy or completeness of the information provided on the website. Nothing on this website should be interpreted to constitute any legal advice. S.S Rana & Co. is not liable for any consequences arising out of any action taken by the visitor / user relying on material/information provided on this website, and the visitor / user should seek the advice of competent counsel licensed to practice in the relevant country/state for any legal issue.

By accessing the website, the visitor /user acknowledges that he/she on his own accord wishes to know more about S.S Rana & Co. and the website for his/her own information and use. The visitor/user further acknowledges that there has been no solicitation, invitation or inducement of any kind sort whatsoever from S.S Rana & Co. or from any of its members to create an Attorney-Client relationship through this website. The visitor/user furthers acknowledge having read and understood this Disclaimer.