Exclusive | 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.