2018 (4) TMI 581 - AAR - GST

Rate of tax - standing rubber trees - applicant contends that the tax liability of timber and firewood/fuel wood is explained under HSN code 4401 and there is no direction to collect GST for standing trees of rubber trees which fall under HSN code 06. But, the State Farming Corporation is demanding 18% on live rubber trees - Held that - under the contract of supply, growing crops, i.e., rubber trees are agreed to be severed before supply and hence, comes under the definition of goods . Thus, standing rubber trees no longer remain as such. Therefore, it can only be treated as wood in rough form . In GST, firewood is exempted as per HSN Code 4401. There is no differentiation between soft wood and hardwood in GST. The rate of tax on rubber wood in the aforesaid transaction is 18% under the HSN 4403.

Summary

Issues:
Rate of tax on standing rubber trees under HSN code 06 and the applicability of GST, Tax liability of CGST and SGST for standing rubber trees and firewood.

Analysis:
The applicant, a small scale contractor, sought an Advance Ruling on the tax rate of standing rubber trees. The applicant purchases, cuts, and removes rubber trees from plantations of public sector undertakings and private individuals in Kerala. The applicant participated in an e-auction for cutting 6696 standing rubber trees from a PSU under the Central Government. The applicant argued that the tax liability of timber and firewood is under HSN code 4401, and there is no GST direction for standing rubber trees falling under HSN code 06. However, the State Farming Corporation demanded 18% tax on live rubber trees, which the applicant contested, stating that GST applies only when the trees are cut down and separated into timber or wood. The applicant highlighted that rubber trees are soft wood primarily used for manufacturing packing cases and plywood substitutes after processing.

The applicant further contended that during the VAT period, the Government of Kerala exempted rubber trees/wood from tax as they are not suitable for construction purposes, providing relief to growers. The questions raised by the applicant for determination included the tax rate on live rubber trees under HSN code 06, the insistence on 18% GST despite lack of clarification from GST authorities, and the applicable rates of CGST and SGST for standing rubber trees and firewood. The authorized representative of the applicant presented arguments, which were duly examined.

The Authority for Advance Ruling analyzed the terms and conditions of the e-tender by the State Farming Corporation, which required the contractor to cut and remove trees, specifying that no other trees or fuel wood should be cut or removed. Referring to the CGST Act, the Authority determined that under the contract, the rubber trees were agreed to be severed before supply, thus falling under the definition of 'goods.' Consequently, standing rubber trees were considered as 'wood in rough form.' Additionally, the Authority noted that firewood is exempt under HSN Code 4401 in GST, with no distinction between softwood and hardwood.

In conclusion, the Authority ruled that the tax rate on rubber wood in the transaction was clarified to be 18% under HSN 4403, resolving the issues raised by the applicant regarding the tax treatment of standing rubber trees and firewood under the GST regime.