2022 (12) TMI 122 - AAR - GST

Classification of goods - rate of GST - sale of rejected paddy seed - fit for human consumption or could be used for Industrial usage, Cattle feed production, Manure production etc. - HELD THAT - The goods under question would merit classification under a heading only if the conditions as stipulated are adhered to. The rules of interpretation for classification, section notes and chapter notes as specified under Customs Tariff Act 1975 are applicable for classification of the impugned goods. Any additional usage / functionality would disentitle the impugned goods from getting classified under any heading. Needless to mention here that, besides this the technical information and parameters of the impugned goods intended to be traded by the applicant consequent upon its receipt from the supplier, its intended use downstream is also of much relevance for arriving at the appropriate classification of the same. Purely based on the description of the goods mentioned in the tender / agreement document with Chhattisgarh State Cooperative Marketing Federation i.e., rejected paddy / damaged paddy (not fit for human consumption) would merit classification under chapter heading 1006 10, subject to stipulations and conditions as mentioned in the Section note and chapter note. Any further classification i.e., whether the rejected paddy/damaged paddy is of seed quality or other is not possible in absence of further description or technical information or parameters of the impugned goods. Applicable tax rate on such goods - HELD THAT - There is no doubt that the same depends upon the classification of the goods in question as discussed above and the effective rates of such goods are specified in schedules appended to Notification no. 01/2017-CT(Rate) dated 28.6.2017 as amended and subject to the adherence of stipulations mentioned therein - the applicable rate of tax on all goods classifiable under chapter 10 i.e., cereals is 2.5% CGST 2.5%SGST, in terms of entry no. 45 to 59 (except sr. no. 57) to Schedule-I to Notification no. 01/2017-CT(Rate) dated 28.6.2017 as amended vide Notification No. 6/2022-Central Tax (Rate)New Delhi, the 13th July 2022, effective from 18.7.2022. In view of the section 103 of CGST Act, 2017, the ruling given IN RE M/S. SAM OVERSEAS 2019 (3) TMI 1954 - APPELLATE AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND would be binding only on the relevant applicant and on the concerned officer or the jurisdictional officer.

Summary

Issues Involved:

1. Classification and applicability of GST Rate on the Sale of Rejected Paddy Seed in a bag of quantity more than 25Kg.
2. Applicability of S.No. 70 of Notification No. 02/2017 dated 28.06.2017.
3. Determination of liability to pay tax on supply of rejected paddy sale.
4. Differential classification under each category from the GST perspective based on Harmonized System of Nomenclature (HSN).
5. HSN classification & GST rate based on usage separately.

Detailed Analysis:

1. Classification and applicability of GST Rate on the Sale of Rejected Paddy Seed in a bag of quantity more than 25Kg:

The applicant, M/s Shraddha Traders, sought an advance ruling on the classification and applicability of GST on the sale of rejected paddy seed. The applicant contended that the rejected paddy seed, not fit for human consumption and used for industrial purposes, cattle feed, and manure production, should be classified under HSN Code 1006 10 10. This classification was based on the GST tariff and the Customs Tariff, which covers cereals under Chapter 10.

The authority examined the submissions and noted that the classification of goods under the Customs Tariff Act 1975 is applicable for GST purposes. The goods described in the tender/agreement documents as "rejected paddy/damaged paddy" (not fit for human consumption) would merit classification under Chapter 1006 10, subject to the conditions mentioned in the Section and Chapter notes.

2. Applicability of S.No. 70 of Notification No. 02/2017 dated 28.06.2017:

The applicant referred to the amended Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017 and Notification No. 2/2017 - Central Tax (Rate) dated 28.06.2017, which provide tax rates and exemptions for goods. The authority clarified that the exemption under S.No. 70 of Notification No. 02/2017 applies to "Rice other than pre-packaged and labelled" and not to "paddy" or "rejected paddy/damaged paddy."

3. Determination of liability to pay tax on supply of rejected paddy sale:

The authority determined that "rejected paddy/damaged paddy," classified under Chapter 1006 10, would be subject to a tax rate of 2.5% CGST + 2.5% SGST, as specified in Schedule I of Notification No. 01/2017-CT (Rate) dated 28.06.2017, as amended. The exemption under S.No. 70 of Notification No. 02/2017 does not apply to rejected paddy.

4. Differential classification under each category from the GST perspective based on Harmonized System of Nomenclature (HSN):

The authority noted that the applicant did not provide sufficient details or processes for converting rejected paddy into animal feed, cattle feed, manure, etc. Without adequate information, it was not possible to conclusively determine the classification based on HSN for each category.

5. HSN classification & GST rate based on usage separately:

The authority mentioned that animal feeds fall under Chapter 2309, cattle feed under Chapter 2302, and manure under Chapters 3101, 3102, 3103, 3104, and 3105 of the Customs Tariff. However, due to the lack of detailed information from the applicant, a conclusive ruling on the classification and GST rate based on usage could not be provided.

Order:

(a) Rejected paddy seed would merit classification under Chapter heading 100610, subject to compliance with the Section and Chapter notes.

(b) The exemption from tax under S.No. 70 of Notification No. 02/2017 is not applicable to "Rejected paddy/Damaged paddy."

(c) "Rejected paddy/Damaged paddy" would be subject to a tax rate of 2.5% CGST + 2.5% SGST.

(d) Due to insufficient details, no conclusive ruling on the classification based on usage (animal feed, cattle feed, manure, etc.) could be provided.