Supreme Court to Decide if Industrial Felt is ‘Fabric’ or ‘Machinery Part’ for VAT Purposes

• The Supreme Court is set to examine whether industrial ‘felt’ textile should be classified as ‘fabric’ (taxed at 4%-5%) or as a ‘machinery part’ (taxed at 12.5%-13%) under VAT law.
• M/s Sealwell Industries, manufacturing woollen felt components for industrial machinery, classified their product as “fabric” and paid the lower VAT rate, but tax authorities reclassified it as a “machinery part” and imposed a higher rate.
• The Madhya Pradesh High Court upheld the higher tax classification, emphasizing the product’s commercial identity and actual use in machinery, not as fabric or dress material.
• The petitioner argued that felt is inherently a textile and should be taxed as fabric, citing previous Supreme Court precedent, while the Revenue argued for classification based on common commercial usage.
• The Supreme Court will now decide the correct VAT classification for industrial felt.

Source: taxscan.in

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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