Some leading manufacturers, which were passing off wet baby wipes as non-woven textile material or napkins used by kids and charging 12 per cent goods and services tax ( GST), may have to cough up higher tax with interest after the government clarified that essential items in baby bags will attract 18 per cent levy.

A clarification issued by the revenue department has finally ended a tax dispute.

Tax lawyer R S Sharma said many suppliers were evading GST by paying 12 per cent by misclassifying wet baby wipes under different GST codes, when it is a cosmetics preparation and manufacturers are working under a cosmetics manufacturing licence. “Such suppliers will face GST demand and interest,” he said, adding that the Uttarakhand Authority of Advance Ruling has already ruled that wet baby wipes are subject to 18 per cent tax. But baby wipes were not the only bone of contention. There were other issues as well and the revenue department has said fortified toned milk should be treated on a par with fresh and pasteurised milk and face zero GST. Similarly, a housewife may prefer treated (modified) tamarind kernel powder over plain or unmodified tamarind kernel powder but the tax department has ruled that the GST rate will be the same at 5 per cent.

And, a taxpayer asked the government, what about the levy on cotton quilts if the cover is not made of cotton? With cotton quilt getting its character from the filling material, the revenue department is of the view that irrespective of the material used for the cover, the tax rate will be 5 per cent if the quilt costs less than Rs 1,000 and 12 per cent if it is above the threshold. “These clarifications should address rate-related ambiguities faced by some major industries like automotive, fertilizers, oil refineries, etc, and also aid in bringing uniformity in rates. Today, various players have been charging different rates on the basis of their interpretation,” said Abhishek Jain, tax partner at consulting firm EY.