A rose by any other name, smells just as sweet. Unfortunately, this doesn't apply in the sphere of indirect taxation, where the applicable excise tax rate depends on its classification.

Litigation abounds on which category or class a product falls in. According to tax experts, given the multi-tier GST structure, cess on some items and also the continuation of the existing basis of classification, litigation is likely to spike, at least initially.

A few days ago, the Central Board of Excise and Customs (CBEC) had to spell out whether a 'saree', which had undergone 'further processing' such as embroidery, stitching of lace and tikki (sequences) or stitched with two or more kinds of fabrics would still be classified as a 'saree' under Chapter 54 or as 'other made-up textile goods' under Chapter 63 of the Central Excise Tariff Act, 1985.

While laymen may wonder what the fuss is all about, Bipin Sapra, indirect tax partner at EY India, explains: "The clarification given by the CBEC on March 15 is relevant from the excise duty perspective. Duty on 'sarees' classified under chapter head 50, 52 or 54 are exempt, whereas 'made ups' classified under chapter 63 attract an excise rate of 12.5%. In its circular, CBEC ruled that the essential characteristic of the fabric would not change for a 'saree' which has been embellished with embroidery, lace or sequins. In other words, it would continue to attract nil duty."

The Delhi high court recently held that a woman's footwear without a back-strap is a 'sandal' and not a 'chappal'—this decision went viral on social media owing to what seemed a trivial issue. At the crux of the litigation was the fact that export of 'sandals' entails a higher duty draw back of 10% (refund on import duty paid on inputs) as opposed to just 5% available on export of 'chappals'.

The GST council has finalised a multi-tier GST rate structure with rates of 5%, 12%, 18%, 28% and 28% . In addition, certain categories of goods and services such as soft drinks or luxury cars, will attract a cess. Additionally, there will be certain goods and services, including essentials, which would be exempt or chargeable to nil rate or would require differential treatment from input tax credit perspective.