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2023 (2) TMI 1082 - AAR - GSTRate of GST - Coir-Pith Compost - liability of registered person, selling coir-pith compost in 30 kg and above quantity bags with un-registered brand name SURYA - GST on coir-pith compost in 30kg and above quantity bags are sold without any label (in plain bags) - GST on coir-pith compost sold in 25 kg and less prepacked and labelled bags to nurseries who buys for consumption - nurseries, who are un-registered dealers, come under the definition of Institutional consumers or not - liability of GST, when registered persons sells coir-pith compost with 30Kg and above pre-packed and labelled bags to nurseries who buys for consumption - applicability of Rule 3(b) of Legal Metrology (Packaged commodities) Rules, 2011. Whether Notification No. 7/2022-Central Tax (Rate), dated 13-07-2022 applies to Coir-Pith Compost (HSN 53050040) mentioned in serial number 132-A of the Notification No.2/2017-Central Tax (Rate) dated 28-06-2017 as amended vide notification No. 19/2018-Central Tax (Rate), dated 26-07-2018? - HELD THAT - The entry 132A of Notification No.2/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No.7/2022-Central Tax (Rate), dated 13-07-2022 applies to Coir-Pith Compost other than pre-packaged and labelled. The registered person sells coir-pith compost in 30 kg and above quantity bags with un-registered brand name SURYA . In such cases, whether the registered person is liable to tax under the GST Acts? - HELD THAT - The Applicant states that he sells coir pith compost in a sack of 30 kg and above with unregistered brand name 'SURYA' and wants to know the taxability on the same - the provisions of Chapter II of The Legal Metrology (Packaged Commodities) Rules, 2011 applies to cement and fertilizers even though they are sold in bags up to 50 Kg. In view of the definition of organic fertilizer and the process adopted by the applicant to manufacture coir pith compost, it can be said that coir pith compost is an organic fertilizer which is covered under the definition of Fertilizer mentioned above i.e., organic fertilizer is a subset of fertilizer. Thus, anything which increases the fertility of soil is Fertilizer. Since Manure is also used to increase the fertility of soil, the same is also a Fertilizer whether organic or chemical - If the Applicant sells coir pith compost which is a fertilizer, in a sack of 30 kg and above i.e., prepacked and labelled with unregistered brand name i.e., 'SURYA' then it is exigible to GST at 5%. If the coir-pith compost in 30kg and above quantity bags are sold without any label (in plain bags), whether would it attract GST? - HELD THAT - 'Pre-packaged and labelled' means a 'pre-packaged commodity' (as defined in clause (1) of section 2 of the Legal Metrology Act, 2009) where, the package in which the commodity is pre-packed or a label securely affixed thereto is required to bear the declarations under the provisions of the Legal Metrology Act, 2009 and the rules made thereunder. Thus, if the Applicant sells coir-pith compost pre-packed in 30kg and above quantity bags without label also it is taxable (as explained in para 12 supra) since it is already prepacked and bearing a label is mandatory. If the registered person sells coir-pith compost in 25 kg and less prepacked and labelled bags to nurseries who buys for consumption, whether in such cases GST is payable? - HELD THAT - Chapter -II of The Legal Metrology (Packaged Commodities) Rules, 2011 is about provisions applicable to packages intended for retail sale. Rule 3(a) of the same says that these rules are not applicable to packages of commodities containing quantity of more than 25 kg or 25 litre. Since the applicant intends to sell coir-pith compost in bags of 25 kg and less i.e pre-packed and labeled the same is exigible to GST at 5% as per entry No. 215 of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 as amended vide Notification No.6/2022-Central Tax (Rate), dated 13.07.2022. Whether the nurseries, who are un-registered dealers, come under the definition of Institutional consumers ? - HELD THAT - A plant nursery is an establishment that raises, propagates, multiplies, and sells seedlings, saplings, and other planting materials for commercial purpose and thus it does not qualify to be an institution. Further, nurseries buy coir pith compost to grow the plants and then sell the same i.e nothing but for commercial purpose. Since the nurseries use coir pith compost for commercial purposes, they are not covered under the definition of 'institutional consumer'. If the registered persons sells coir-pith compost with 30Kg and above pre-packed and labelled bags to nurseries who buys for consumption, whether in such cases GST is payable? - HELD THAT - Since coir pith compost is a fertilizer as explained in para 12.2, Chapter II of the Legal Metrology (Packaged Commodities) Rules, 2011, that is provisions applicable to packages intended for retail sale are applicable to fertilizer even though they are sold in bags up to 50kg. As explained in para 15 supra, nurseries are not covered under 'institutional consumer'. Thus if the applicant supplies coir-pith compost of 30Kg and above which is prepacked and labeled even to nurseries, then it is exigible to GST at 5% (CGST 2.5% and SGST 2.5%) Rule 3(b) of Legal Metrology (Packaged commodities) Rules, 2011, provides that the provisions of Chapter II of that Rules shall not apply to cement, fertilizers and agricultural farm produce sold in above 50 kg bags. Whether the coir-pith compost, which is also the bio-fertilizer, sold by the registered person, falls under this category and exempt from GST? - HELD THAT - Rule 3(b) of Legal Metrology (Packaged commodities) Rules, 2011 says that these rules are not applicable to packages of commodities containing quantity of more than 25 kg or 25 litre excluding cement and fertilizer sold in bags up to 50 kg i.e Chapter II of that Rules shall not apply to fertilizers sold in above 50 kg bags and hence they are not exigible to GST if sold in above 50 kg bags.
Issues Involved:
1. Applicability of Notification No. 7/2022-Central Tax (Rate) to Coir-Pith Compost. 2. Tax liability on coir-pith compost sold in 30 kg and above quantity bags with an unregistered brand name. 3. Taxability of coir-pith compost sold in 30 kg and above quantity bags without any label. 4. GST applicability on coir-pith compost sold in 25 kg and less prepacked and labelled bags to nurseries. 5. Whether nurseries qualify as "Institutional consumers". 6. GST applicability on coir-pith compost sold in 30 kg and above pre-packed and labelled bags to nurseries. 7. Exemption from GST for coir-pith compost sold in bags above 50 kg. Detailed Analysis: 1. Applicability of Notification No. 7/2022-Central Tax (Rate) to Coir-Pith Compost: The ruling clarified that entry 132A of Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 7/2022-Central Tax (Rate) dated 13.07.2022, applies to Coir-Pith Compost other than pre-packaged and labelled. The term "pre-packaged and labelled" is defined in the Legal Metrology Act, 2009, meaning any commodity prepacked and requiring declarations under the Act and its rules. 2. Tax Liability on Coir-Pith Compost Sold in 30 kg and Above Quantity Bags with an Unregistered Brand Name: The ruling referred to entry No. 215 of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, amended by Notification No. 18/2018-Central Tax (Rate) and Notification No. 6/2022-Central Tax (Rate). It concluded that coir-pith compost sold in 30 kg and above pre-packed and labelled bags with an unregistered brand name "SURYA" is exigible to GST at 5% (CGST 2.5% and SGST 2.5%). 3. Taxability of Coir-Pith Compost Sold in 30 kg and Above Quantity Bags Without Any Label: The ruling highlighted that under Rule 4 of The Legal Metrology (Packaged Commodities) Rules, 2011, pre-packaged commodities must bear a label securely affixed. Thus, even if coir-pith compost is sold in 30 kg and above quantity bags without a label, it is still taxable at 5% GST as it is pre-packed. 4. GST Applicability on Coir-Pith Compost Sold in 25 kg and Less Prepacked and Labelled Bags to Nurseries: The ruling stated that coir-pith compost sold in 25 kg and less pre-packed and labelled bags is subject to GST at 5% as per entry No. 215 of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 6/2022-Central Tax (Rate). 5. Whether Nurseries Qualify as "Institutional Consumers": The ruling referred to the definition of "institutional consumer" in the Legal Metrology (Packaged Commodities) Rules, 2011, amended in 2017. It concluded that nurseries, which buy coir-pith compost for commercial purposes, do not qualify as "institutional consumers." 6. GST Applicability on Coir-Pith Compost Sold in 30 kg and Above Pre-packed and Labelled Bags to Nurseries: Since nurseries are not considered "institutional consumers" and coir-pith compost is classified as a fertilizer, the ruling concluded that coir-pith compost sold in 30 kg and above pre-packed and labelled bags to nurseries is exigible to GST at 5%. 7. Exemption from GST for Coir-Pith Compost Sold in Bags Above 50 kg: The ruling referred to Rule 3(b) of the Legal Metrology (Packaged Commodities) Rules, 2011, which exempts fertilizers sold in bags above 50 kg from the applicability of Chapter II of the Rules. Thus, coir-pith compost sold in bags above 50 kg is exempt from GST. Ruling Summary: i. Entry 132A of Notification No. 2/2017-Central Tax (Rate) as amended by Notification No. 7/2022-Central Tax (Rate) applies to Coir-Pith Compost other than pre-packaged and labelled. ii. Coir-pith compost sold in 30 kg and above quantity bags with unregistered brand name "SURYA" is exigible to GST at 5%. iii. Coir-pith compost sold in 30 kg and above quantity bags without any label is taxable at 5%. iv. Coir-pith compost sold in 25 kg and less pre-packed and labelled bags to nurseries is exigible to GST at 5%. v. Nurseries are not covered under the definition of "Institutional consumers." vi. Coir-pith compost sold in 30 kg and above pre-packed and labelled bags to nurseries is exigible to GST at 5%. vii. Coir-pith compost sold in bags above 50 kg is exempt from GST.
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