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Toy manufacturers to see higher GST liability following AAR ruling

Toy manufacturers to see higher GST liability following AAR ruling

Toys manufacturers are set to see higher tax liabilities after a ruling said that toys that have any form of light or sound should be treated as electronic toys and taxed at 18% under Goods and Services Tax (GST).

While electronic toys such as expensive robots and kids’ tablets attracted 18% GST earlier, other toys such as tricycles and bicycles were taxed at 12%.

The Tamil Nadu Authority for Advance Ruling (AAR) held that children’s scooters, smart tricycles and kick scooters– in which physical force is the primary action but they also have electronic circuits or parts for providing lights, music, etc. – should be taxed as electronic toys.
“In common parlance, electronic toys are generally understood as toys whether electrically or battery operated, hence the applicant sought for classification at the lower rate. Authorities here have disregarded the test of common parlance and looked into other minute aspects like safety standards of the product, the way toys are advertised,” said Harpreet Singh, partner, Indirect taxes at KPMG in India.

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