Burden of tax on Heena Manufacturers and Traders under GST

The GST Council at its meeting on May 18, 19 has evolved a consensus on GST rates for goods and services, leading us closer to July 1 implementation. The underlying objective of rate declaration was clear for some time, which is to maintain the current effective indirect tax burden to control inflation and avoid surprises. The government has kept a large number of items under 18% tax slab. The government categorised 1211 items under various tax slabs.
The products falling under tariff heading chapter 3305 will be charged at maximum rate of 28%. These are cosmetics items and covers hair dyes also. The rate of 28% is correct for such items. But the products like Heena powder and Heena Paste also fall under the same tariff heading. As a consequence of the same, these products will also attract duty @ 28%.
But these products are enjoying exemption under serial no. 134 of the exemption Notification No. 12/2013-CE dated 01.03.2013 under the current regime. Not only this, since no central excise duty was paid by the heena manufacturers due to normal trade practice, the government has recently given retrospective exemption to Heena powder and Henna paste by Notification No. 11/2017-C.E.(N.T.) dated 24.04.2017. This was done by exercise of powers under section 11C of the Central Excise Act, 1944. This retrospective exemption was provided to heena powder and paste cleared from 01.01.2007 to 01.03.2013. Apart from the exemption from levy of central excise duty, the heena products also enjoy exemption from levy of taxes levied by the State Government.
This levy of tax on Heena powder and Paste under GST contradicts the underlying objective of rate fitment i.e. to maintain current effective indirect tax burden under GST. Though Government Officials always gave intimation that there will be curtailment in present exemptions and abatements applied on goods and services but this is a very harsh provision on Heena Manufactures and Traders as their product is very low priced and ultimately paying such large amount of tax under GST will make it difficult to survive under new indirect taxation reform.
Many associations from Sojat city in Rajasthan are gearing up to take up this matter with the Government. We hope that the Government will address to this situation and try to continue the exemption to these small scale manufacturers. This favour will provide immense relief to the manufacturers of heena powder and heena paste.
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