The Supreme Court has ruled that coconut oil is classified as edible oil for tax purposes, resolving a 15-year debate and benefiting FMCG players like Marico and Bajaj Consumer.

The Supreme Court rejected the tax department’s plea to classify coconut oil sold in small packages as hair oil, settling a 15-year dispute.

This judgment significantly impacts coconut oil manufacturers, who can now benefit from the lower GST rate of 5% for edible oils, compared to 18% for hair oils.

The core issue was whether coconut oil in packages under 2 kg should fall under Heading 1513 (edible oil) or Heading 3305 (hair oil) of the Central Excise Tariff Act.

On 18th December, the Supreme Court ruled that coconut oil in small packages, including sachets and bottles, qualifies as edible oil under Heading 1513.

The dispute began in 2009, when CESTAT classified coconut oil as edible oil, a decision that was challenged in later years.

A split verdict by a two-judge bench in 2018 led to the matter being referred to a three-judge bench headed by Chief Justice Sanjiv Khanna.

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