2019 (10) TMI 563 - AAR - GST

Classification of goods - wood logs or any kind of wood in the rough/ timber - supply of debarked Eucalyptus, Acacia, Subabul, Casurina, Pine Pulpwood in billets of required size to paper mills based on their requirement - Eucalyptus De-barked pulp wood, and exclusively used to obtain pulp, which an important raw material in paper manufacturing - whether classified under HSN code 4403 or under HSN Code 4401? - HELD THAT - Heading 4401 covers fuel wood, in logs, in billets, in twigs, in faggots or in similar forms; wood in chips or particles; sawdust and wood waste and scrap, whether or not agglomerated in logs, briquettes, pellets or similar forms - Comparison of the specifications narrated by the applicant and the nature of goods covered under the heading clearly show that the instant goods would not be covered under the Heading 4401. Heading 4403 covers Wood in the rough, whether or not stripped of bark or sapwood, or roughly squared - This clearly brings out that the quarter splits for pulping shall be covered under the Heading 4403. The applicant clearly expressed that supply of debarked Eucalyptus, Acacia, Subabul, Casurina, Pine Pulpwood in billets form of required size to paper mills. But it is not in the form of supply of debarked wood in pellet and briquettes form. Hence it comes under the heading of HSN 4403 of Wood in the rough, whether or not stripped of bark or sap wood or roughly square. A Circular was issued by the Government of India bearing Circular number 80/54/2018-GST dated 31-12-2018 stating that representation had been received seeking clarification on applicability of GST rate on wood log for pulping - Thus, it is clarified that wood logs or any kind of wood in the rough/ timber, including the wood in rough/ log/ timber used for pulping falls under heading 4403 and attract GST at the rate of 18%. The goods in question is verified and found that they are in the form of small logs (in the form of billets) and hence cannot be covered under HSN 4401. Hence they are squarely covered under the entry 4403 as clarified in the Circular No. 80/54/2018-GST dated 31-12-2018.

Summary

Issues: Classification of Pulpwood supplied to paper mills and the rate of tax (GST) thereon.

Classification of Pulpwood:
The applicant sought an advance ruling regarding the classification of various types of pulpwood supplied to paper mills. The applicant supplied debarked Eucalyptus, Acacia, Subabul, Casurina, Pine Pulpwood in billets to paper mills based on their requirements. The applicant highlighted the confusion in the interpretation of applicable sections for this type of pulpwood by different buyers, leading to varying GST rates being charged by different paper mills. The applicant also mentioned their inability to quote the correct GST rate to customers due to this confusion.

Analysis of Classification:
The Authority for Advance Ruling analyzed the specifications provided by the applicant against the relevant headings under the CGST Act and the KGST Act. They compared Heading 4401, covering fuel wood, with Heading 4403, covering Wood in the rough. After detailed examination, it was concluded that the goods supplied by the applicant did not fall under Heading 4401 but were appropriately classified under Heading 4403 as per the specifications provided. A circular issued by the Government of India further clarified that wood logs used for pulping fall under Heading 4403 and attract an 18% GST rate.

Rate of Tax (GST) Determination:
Based on the classification analysis, the Authority ruled that the applicant is liable to pay CGST and SGST at the rate of 9% each for the supply of debarked Eucalyptus, Acacia, Subabul, Casurina, Pine Pulpwood in billets to paper mills under HSN code 4403. This ruling was made in accordance with Circular No. 80/54/2018-GST dated 31-12-2018, which clarified the GST rate applicability for wood logs used for pulping.

Conclusion:
The judgment provided a detailed analysis of the classification of pulpwood supplied to paper mills and the applicable GST rate. By examining the specifications of the supplied wood against the relevant headings and circulars, the Authority for Advance Ruling determined the correct classification and GST rate for the applicant's transactions, ensuring clarity and compliance in tax matters related to the supply of pulpwood to paper mills.