Herbal Smoke Sticks Denied GST Relief Over Ayush Certification
The Gujarat Appellate Authority for Advance Ruling (AAAR) has denied a tax concession plea filed by Aorom Herbotech, a manufacturer of herbal smoke sticks, citing the absence of certification from the Ministry of Ayush. The company had sought a reclassification of its product under a lower tax bracket, arguing that it was an Ayurvedic alternative with therapeutic benefits. However, the appellate body upheld the earlier ruling, keeping the product in the 28% Goods and Services Tax (GST) slab, classifying it as a substitute for conventional cigarettes rather than a medicinal item.
The ruling highlights a key challenge in India’s regulatory landscape, where herbal and alternative wellness products often struggle to gain official recognition unless backed by established Ayurvedic texts and government approvals. The appellate authority pointed out that Aorom Herbotech failed to provide evidence from authoritative Ayurvedic literature justifying its claim that the product falls under the category of medicinal cigarettes. Additionally, the firm was unable to secure an Ayurveda manufacturing licence from the Food and Drug Control Administration (FDCA), further weakening its case. The ruling emphasised that a mere absence of tobacco and nicotine does not automatically make the product medicinal, reinforcing the need for compliance with Ayush standards.
A Battle Between Innovation and Regulation
The dispute underscores the broader tension between emerging wellness products and regulatory frameworks. Herbal smoking alternatives have been gaining traction as consumers seek tobacco-free options amid rising awareness about smoking-related health risks. However, without proper certification, these products risk being categorised alongside conventional tobacco products, attracting higher taxation and regulatory scrutiny. The appellate body further noted that Aorom Herbotech marketed its product as a cigarette alternative rather than a therapeutic solution, contradicting its own claim of aiding smoking cessation. This ruling sets a precedent for similar products attempting to enter the market without clear compliance with Ayush norms.
From a sustainability perspective, the ruling also raises concerns over the regulation of herbal products that claim to be environmentally friendly yet fail to meet strict medical guidelines. With increasing consumer interest in alternative wellness solutions, the need for a transparent, well-defined approval mechanism for non-tobacco smoking products is more crucial than ever. At a time when sustainable living is a growing priority, companies innovating in this space may require clearer pathways to certification to ensure their products are not misclassified under existing tax structures.
Civic and Urban Policy Implications
This case reflects the challenges businesses face in navigating India’s evolving taxation and health policy landscape. The GST framework, designed to rationalise indirect taxation, is now influencing how wellness and lifestyle products are defined and categorised. With no clear policy framework to differentiate medicinal herbal smoke from regular alternatives, businesses may find themselves in prolonged legal battles, delaying their market access. Additionally, the absence of a flexible regulatory mechanism may dissuade innovators from investing in sustainable, health-conscious alternatives to conventional tobacco-based products.
The ruling on Aorom Herbotech’s case is likely to have a far-reaching impact on the alternative smoking industry. Companies developing tobacco-free products will have to align their formulations with recognised Ayurvedic texts and secure Ayush approvals to avoid higher taxation. As demand for healthier and eco-friendly alternatives grows, policymakers may need to reconsider existing classification norms to foster innovation while maintaining regulatory integrity. In the meantime, businesses looking to enter this space must prepare for stringent compliance requirements and potential legal scrutiny before launching their products in the Indian market.
