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Several automotive component manufacturers have been issued higher tax demands by the goods and services tax authorities. The basis for these demands is a Supreme Court judgement related to a company owned by the West Bengal government. The Directorate General of Goods and Services Tax Intelligence (DGGI) has sent notices to at least 17 companies in the past 45 days, amounting to a total tax demand of over Rs 12 billion. Officials have indicated that more notices will be sent, potentially increasing the amount further. The higher tax demands are in accordance with the Supreme Court's ruling in the case of Westinghouse Saxby Farmer. The court stated that parts exclusively used in the automobile industry should be subject to a higher tax rate, emphasizing the need for consistency in taxation principles between industries. The companies affected by the tax demands are manufacturers of various automotive components, including engines, horns, locks, lights, sensing devices, valves, switch panels, LCD screens used in dashboard displays, oil seals, and other electronic components. Although these manufacturers have been paying goods and services tax (GST) on the parts at a lower rate, typically 18%, the tax authorities argue that a rate of 28% should apply. They justify this based on the GST Law, which specifies the 28% rate for parts and accessories of motor vehicles. The component manufacturers have received demand notices for the differential amount, along with interest. Some of these companies are now considering challenging these notices in court. The classification dispute stems from a 2021 Supreme Court judgement involving Westinghouse Saxby Farmer, a manufacturer of relay systems used in railway signalling. The company had classified the relays it produced as part of railway equipment, which attracted a lower tax rate. It contended that since the parts were exclusively manufactured for use in railways, they should be classified accordingly. However, the authorities sought a reclassification of the product, resulting in higher taxation. Also read: KEC bags new orders worth Rs 1,042 cr 15km pod taxi corridor in Noida up for grabs