The urgent requirement for alcohol-based hand sanitisers amid the Covid-19 pandemic enthused many firms, including sugar mills and alcohol producers, to jump on the bandwagon.
But, it seems, some evaded duties worth crores of rupee by classifying their products under a lower-taxed tariff heading.
The Central Economic Intelligence Bureau (CEIB), which comes under the Department of Revenue, in a recent communication to the Directorate General of GST Intelligence (DGGI) has said some manufacturers of alcohol-based sanitisers are resorting to "non-payment" or "evasion" of Central GST and State GST by adopting wrong classification. They were paying 12 per cent GST instead of the 18 per cent, it said.
Following the CEIB letter, the DGGI prepared a list of 62 manufacturers and suppliers of sanitisers for analysis.
The DGGI has asked the CGST and the Customs Excise zones officials to look into the cases of evasion by sugar mills and distilleries and plug the leakages. The DGGI zonal units are looking into the instances of evasion by established brands.
"These manufacturers are classifying such products under the tariff heading 3004 under the harmonized system of nomenclature (HSN), whereas they are correctly classifiable under the tariff heading 3808," the CEIB letter said.
The current applicable GST on products under heading the tariff heading 3004 of HSN of 2017 is 12 per cent, while the rate on those items under the tariff heading 3808 is 18 per cent.
The misclassification had resulted into "substantial evasion of CGST across the country," it noted.
Acknowledging that the GST on alcohol-based hand sanitisers is 18 per cent, sugar industry officials said some manufacturers might be paying lower tax but that couldn't be generalised.
The tariff heading 3004 includes medicaments comprising mixed or non-mixed products for therapeutic or prophylactic uses or in packs for retail sale, including Ayurvedic and Unani.
The tariff heading 3808 includes disinfectants under which alcohol-based hand sanitisers come. The classification also comprises insecticides, fungicides among others.
The misclassification had been continuing since the introduction of GST on July 1, 2017, it said.