Dabur’s Hajmola candy under DGGI scanner over GST classification

In yet another classic case of a GST classification issue, Dabur India's popular Hajmola candy is under investigation by the Directorate General of GST Intelligence (DGGI).

According to sources, Dabur India and the DGGI are at loggerheads. "Directorate General of GST Intelligence (DGGI) investigating GST classification of Hajmola Candy under GST," sources added.

The probe is being led by DGGI's Coimbatore zone, which is currently examining whether Hajmola candy should be treated as an ayurvedic medicine attracting 12% GST or as a candy taxed at 18%.

During investigations, a source said, "Dabur has claimed that Hajmola candy is an ayurvedic medicine and not a regular sugar-boiled candy."

An email query sent to Dabur remained unanswered.

It is important to note that Dabur had faced a similar classification challenge in the pre-GST regime, where the Supreme Court had ruled in the company’s favour, stating that Hajmola candy is an ayurvedic medicine and not a confectionery item.

Separately, Dabur is already facing a tax demand. On April 1, it disclosed an income tax reassessment order demanding ₹110.33 crore for the financial year 2017-18. The Income Tax Department alleges incorrect claims for tax deductions related to in-house Research and Development (R&D) and under Section 14A of the Income-tax Act, 1961. Dabur plans to challenge the demand.

It remains to be seen whether the government will change the classification of Hajmola candy and bring it under the 18% rate, or continue with the interpretation upheld by the Supreme Court. Experts say classification clarity will ultimately need to come from the GST Council and could lead to a realignment of the entire category.

“The classification of Hajmola should be based on its formulation, purpose, and recognition under the Ayurvedic system of medicine, rather than merely its form or taste profile. Hajmola is not a conventional sugar boiled candy but it is a proprietary Ayurvedic formulation recognized and marketed as a digestive aid, drawing upon classical Ayurvedic ingredients such as jeera (cumin), hing (asafoetida), pippali (long pepper), and amchur (dried mango), among others. These are time-tested herbs traditionally used for their digestive properties," explained Abhishek A Rastogi, founder of Rastogi Chambers, who is arguing in different courts on GST classification disputes.

“The Central Drugs Standard Control Organization (CDSCO) recognizes Ayurvedic formulations under the ambit of the Drugs and Cosmetics Act, and Hajmola is sold under an Ayurvedic license. It is widely prescribed and consumed for promoting digestion and alleviating gastric discomfort clearly aligning with the therapeutic intent of Ayurvedic medicines," added Rastogi.

“The mere fact that it is palatable or presented in a chewable form does not detract from its essential character as an Ayurvedic medicinal product. The Supreme Court and various tribunals have consistently held that classification should be based on the predominant use and composition of the product, not its taste or appearance. Accordingly, Hajmola satisfies the criteria to be treated as an Ayurvedic medicine and should rightly fall under the 12% GST slab, rather than being taxed at 18% as a general confectionery item," concluded Rastogi.