RECENT CLARIFICATIONS REGARDING GST RATES & CLASSIFICATION OF GOODS

[Dr. Sanjiv Agarwal]

CBIC has issued two detailed Circulars Nos. 163 and 164 dated 06.10.2021 clarifying various issues on taxability, GST rate, classification and exemptions on goods and services based on recent notifications / changes as per the recommendations of GST Council. Such clarifications would help the taxpayers, professionals and the tax officers in understanding and complying with the law.

Following is the Gist of Circular No. 163/20/2021-GST dated 06.10.2021 in relation to clarifications on levy of GST on supply of certain goods.

GST on fresh and dried fruits and nuts

• Fresh nuts (almond, walnut, hazelnut, pistachio etc) falling under heading 0801 and 0802 are exempt from GST, while dried nuts under these headings attract GST at the rate of 5%/ 12%.
• In terms of Note 3 to Chapter 8, dried fruits, even if partially re-hydrated, or subject to preservation say by moderate heat treatment, retain the character of dried fruits or dried nuts.
• Exemption from GST to fresh fruits and nuts covers only such products which are not frozen or dried in any manner as stated above or otherwise processed. 
• Supply of dried fruits and nuts, falling under heading 0801 and 0802 attract GST at the rate of 5%/12% as specified in the respective rate Schedules.

GST on Tamarind Seeds

• GST rate on seeds, falling under heading 1209, meant for any use other than sowing is 5% (S. No. 71A of schedule I of notification No. 1/2017- Central Tax (Rate) dated 28.06.2017) and Nil rate would apply only to seeds for this heading if used for sowing purposes (S. No. 86 of schedule of notification No. 2/2017- Central Tax (Rate) dated 28.06.2017).
• Hence, with effect from 1.10.2021, tamarind and other seeds falling under heading 1209, (i.e. including tamarind seeds), if not supplied as seed for sowing, would attract GST at the rate of 5%.

GST rate on Copra

• As per Explanatory Notes to HS (2017 edition) to heading 1203, Copra is dried flesh of coconut generally used for the extraction of coconut oil. Coconut kernel turns into copra, when it separates from the shell skin, while still being inside the shell. The whole unbroken kernel could be taken out of shell only when it converts to copra. Once taken out of shell, copra could be supplied either whole or broken.
•  As per the Explanatory Notes to HSN, the heading 0801 covers coconut fresh or dried but excludes Copra. Thus, exemption available to Coconut, fresh or dried, whether or not shelled or peeled, vide entry at S. No. 47 of notification No. 2/2017-Central Tax (Rate) dated 28.6.2017, is not available to Copra.
• Copra shall be classified under heading 1203, attracts GST rate of 5% vide entry at S. No. 66 of Schedule I of 1/2017-Central Taxes (Rate) dated 28.06.2017, irrespective of use.

GST on pure henna powder and leaves

• As per the Explanatory Notes to HS 2017, heading 1404 is vegetable products not elsewhere specified or included. Further, as per the said Explanatory Notes, heading 1404 includes raw vegetable materials of a kind used primarily in dyeing or tanning. Such products are used primarily in dyeing or tanning either directly or in preparation of dyeing or tanning extracts. The material may be untreated, cleaned, dried, ground or powdered (whether or not compressed).
• It has been clarified that pure henna powder and henna leaves, having no additives, is classifiable under tariff item 1404 90 90 and shall attract GST rate of 5% (S. No. 78 of schedule I of notification No. 1/2017-Central Tax (Rate) dated 28.06.2017).
• CBIC has clarified that the GST rate on mehndi paste in cones falling under heading 1404 and 3305 shall be 5% (S. No. 78A of schedule I of notification No. 1/2017-Central Tax (Rate) dated 28.06.2017).

GST on scented sweet supari’ and ‘flavored and coated illaichi

• Scented sweet supari falls under tariff item 2106 90 30 as “Betel nut product” known as “Supari” and attracts GST rate of 18% vide entry at S. No. 23 of Schedule III of notification No. 1/2017-Central Tax (Rate) dated 28.6.2017.
• Flavored and coated illaichi generally consists of Cardamom Seeds, Aromatic Spices, Silver Leaf, Saffron, Artificial Sweeteners. It is distinct from illaichi or cardamom (which falls under heading 0908).
• CBIC has now clarified that flavored and coated illaichi is a value added product and falls under sub-heading 2106. It accordingly attract GST at the rate of 18% (S. No. 23 of schedule III of notification No. 1/2017-Central Tax (Rate) dated 28.06.2017).

GST on Grains

• CBIC has clarified on classification and applicable GST rates on Brewers' spent grain (BSG), Dried distillers' grains with soluble [DDGS] and other such residues of starch manufacture and similar residues, beet-pulp, bagasse and other waste of sugar manufacture, brewing or distilling dregs and waste, whether or not in the form of pellets.
• Brewers' spent grain (BSG), Dried distillers' grains with soluble [DDGS] and other such residues are classifiable under heading 2303, attracting GST at the rate of 5% (S. No. 104 of schedule I of notification No. 1/2017-Central Tax (Rate) dated 28.06.2017).

GST on Pharmaceutical goods

• Entry at S.No. 65 of Schedule II of notification No. 1/2017-Central Tax (Rate) dated 28.6.2017, reads as “Pharmaceutical goods specified in Note 4 to this Chapter [i.e. Sterile surgical catgut, similar sterile suture materials (including sterile absorbable surgical or dental yarns) and sterile tissue adhesives for surgical wound closure; sterile laminaria and sterile laminaria tents; sterile absorbable surgical or dental haemostatics; sterile surgical or dental adhesion barriers, whether or not absorbable; Waste pharmaceuticals] [other than contraceptives]”
• S.No. 65 of Second Schedule of Notification 1/2017- Central Tax (Rate) dated 28.6.2017 refers to the note 4 to Chapter 30 of the First schedule of the Customs Tariff Act, 1975 while mentioning an illustrative list. Certain representations were received seeking clarification on the applicable rate of goods falling under heading 3006 that are not specifically mentioned in the Entry at S. No. 65 of Schedule II of notification No. 1/2017-Central Tax (Rate) dated 28.6.2017.
•  CBIC has clarified that entry 65 covers all goods as specified in Chapter Note 4 and Chapter Note 4 in turn covers all goods covered under Heading 3006. Therefore, said entry 65 covers all goods falling under heading 3006, irrespective of the fact that such goods are specifically mentioned in said entry. Therefore, all goods falling under heading 3006 attract GST rate of 12% under entry 65 in the 12% rate schedule.

GST Rate on Laboratory Reagents

• Entry at S. No. 80 of Schedule II of notification No.1/2017- Integrated Tax (Rate) dated 28.6.2017 prescribes GST rate of 12% for “All diagnostic kits and reagents”.
• Heading 3822 covers “Diagnostic or Laboratory Reagents, Certified Reference Materials etc.”.
• CBIC has now clarified it is accordingly clarified that concessional GST rate of 12% is applicable on all goods falling under heading 3822, vide Entry at S. No. 80 of Schedule II of notification No.1/2017-Integrated Tax (Rate) dated 28.6.2017.

GST on External Batteries Sold with Inverter / UPS

• CBIC has clarified on whether, ‘UPS Systems/inverter sold along with batteries as integral part’ are classifiable under heading 8507 at 28% GST or under heading 8504 at 18% GST.
• Even if the UPS/inverter and external battery are sold on the same invoice, their price are separately known, and they are two separately identifiable items. Thus, this constitutes supply of two distinctly identifiable items on one invoice.
• It has been clarified that in such supplies, UPS/ inverter would attract GST rate of 18% under heading 8504, while external batteries would attract the GST rate as applicable to it under heading 8507 (28% for all batteries except lithium-ion battery).

GST on Solar PV Projects

• CBIC has clarified that GST on specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for goods and services, respectively, for the period of 1st July, 2017 to 31st December, 2018, in the same manner as has been prescribed for the period on or after 1st January, 2019, as per the explanation in the Notification No.24/2018 dated 31st December, 2018. 
• However, no refunds will be granted if GST already paid is more than the amount determined using this mechanism.

GST on Fibre Drums

• There was a dispute as regards applicable GST on fibre drums, which is partially corrugated (as to whether it is be treated as corrugated or otherwise).
• CBIC has prescribed that a uniform GST rate of 18% on all goods classifiable under heading 4819 (with effect from 1st October, 2021 under S.No. 153A of Schedule III of notification No.1/2017-Central Tax (Rate) dated 28.6.2017).
• CBIC has now clarified that supplies of such Fibre Drums even if made at 12% GST (during the period from 1.7.2017 to 30.9.2021), would be treated as fully GST-paid. Therefore, no action for recovery of differential tax (over and above 12% already paid) would arise.
• No refund of GST already paid shall be allowed if already paid at 18%.

For text of Circular, readers may refer to the original Circular available on CBIC website and also www.taxmanagementindia.com.

Discussions to this article

[OmPrakash jain]

Sir,

Regarding GST rates on Solar Power projects are concerned, kindly refer Rajasthan State Advance Ruling dated 3.9.2021, in Sapna Gupta

In my view, the rate of GST prescribed in specific entry on “Solar Power Generating System” as 5% will prevail as per decided cases of Supreme Court and as per section 8 of GST Act, in even case of Composite supply, the rate on principal supply will prevail.