2020 (9) TMI 587 - AAR - GST

Classification of goods - bio agricultural products i.e. RhizoMyx and Rhizomyco - classifiable under Chapter 3101 or under Chapter 3002 of CETA Act, 1985 - N/N. 01/2017-Central Tax (Rate) dated 28.06.2017 - Whether the products manufactured by the applicant fall under the Sub-heading 3101 or otherwise? - HELD THAT - As per Notification No.01/2017-Central Tax (Rate) dated 28.06.2017, the sub-heading 3101 covers animal fertilisers or vegetable fertilisers or organic fertilisers. For the purpose of clarity, we will have to refer to the definitions of animal fertilisers, organic fertilisers and organic fertilisers - Since the definition of vegetable fertilisers is not available anywhere, hence it would have to be construed in generic terms. In generic terms, vegetable fertilisers would be the fertilizers derived from vegetable matter like compost and crop residues. On comparing the definition as well as the uses of Biofertilizers vis-a-vis Animal fertilier/organic fertilizer/vegetable fertilizer, it can be seen that Biofertilsers are completely distinct in nature and use to these fertilisers. In view of these facts, we come to the conclusion that biofertilisers are not covered under the Sub-heading 3101 of the First Schedule to the Customs Tariff Act, 1975. Since biofertilizers are not covered under Sub-heading 3101, whether the same is covered under sub-heading 3002 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975) ? - HELD THAT - On going through the column (3) of sub-heading 3002, the entire portion of the description of goods except cultures of micro-organisms (excluding yeasts) pertains to the medical field. On going through the said Sub-heading 3002, it is seen that cultures of micro-organisms (excluding yeasts) appears at Tariff entry No.30029030 of the First Schedule of the Customs Tariff Act, 1975 (51 of 1975). Further as per Vikaspedia, bio fertilizers are produced by culturing of microorganisms and that such cultured micro organisms packed in some carrier material for easy application in the field are called bio fertilisers. Thus, it can be seen that bio-fertilizers are produced by culturing of micro-organisms which is covered by the entry cultures of micro-organisms(excluding yeast) which falls under Sub-heading No.30029030. Thus, it can be concluded that the biofertilizers namely Rhyxomyx and Rhyxomyco manufactured and supplied by the applicant are classifiable under Tariff item No.30029030 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975).

Summary

Issues Involved:
1. Classification of bio agricultural products RhizoMyx and Rhizomyco under GST.
2. Determination of applicable GST rate for the products.

Issue-Wise Detailed Analysis:

1. Classification of Bio Agricultural Products RhizoMyx and Rhizomyco:

The applicant is engaged in the manufacture and taxable supply of biofertilisers, specifically RhizoMyx and Rhizomyco, which contain active ingredients like mycorrhiza and endomycorrhiza, along with inert materials such as humic acids. The applicant contends that these products should be classified under Chapter 3101, which covers animal or vegetable fertilizers, including organic fertilizers.

The definition of biofertilizers, as per the Fertiliser (Control) Order, 1985, includes products containing living microorganisms that enhance soil productivity. The applicant argues that their products fit this definition and should be classified under Chapter 3101, as they are not chemical products but consist of live spores and propagules of endomycorrhizal fungi.

The General Notes applicable to HSN 31 clarify that the chapter covers most products used as natural or artificial fertilizers but excludes products that improve rather than fertilize the soil, such as lime, marl, leaf mould, and peat. The applicant references a previous ruling by the Rajasthan Advance Ruling Authority, which classified a similar product as a biofertilizer under Chapter 3101.

Upon review, the Authority for Advance Ruling (AAR) notes that biofertilizers are distinct from animal, vegetable, and organic fertilizers. Biofertilizers consist of living microorganisms that promote plant growth by increasing nutrient availability. Therefore, the AAR concludes that biofertilizers do not fall under Sub-heading 3101.

2. Determination of Applicable GST Rate:

Since biofertilizers are not covered under Sub-heading 3101, the AAR examines whether they fall under Sub-heading 3002, which includes cultures of micro-organisms (excluding yeasts) and similar products. The Notification No.01/2017-Central Tax (Rate) dated 28.06.2017, lists the GST rates for various goods, including those under Sub-heading 3002.

The AAR finds that biofertilizers are produced by culturing microorganisms, which aligns with the description of "cultures of micro-organisms (excluding yeasts)" under Tariff item No.30029030. Therefore, the biofertilizers RhizoMyx and Rhizomyco are classifiable under this tariff item.

Ruling:

The AAR rules that the products RhizoMyx and Rhizomyco manufactured and supplied by the applicant are covered under Entry Sr.No.61 of Schedule-II of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. Consequently, the applicable GST rate for these products is 12% (6% SGST + 6% CGST).