Clarifications On Applicable GST Rates on Certain Goods

PRODUCT – RAB

• “Rab” means ‘massecuite prepared by concentrating sugarcane juice on open pan furnaces, and includes Rab Galawat and Rab Salawat, but does not include khandsari molasses or lauta gur.’
• The Hon’ble Supreme Court in its order in Krishi Utpadan Mandi Samiti vs. M/s Shankar Industries and others [1993 SCR (1)1037] has distinguished Rab from Molasses.
• Accordingly, it is hereby clarified that Rab is appropriately classifiable under heading 1702 attracting GST rate of 18% (S. No. 11 in Schedule III of notification No. 1/2017-Central Tax (Rate), dated the 28th June, 2017).

• The given clarification appears to be in line with the production process described in the decision of the Supreme Court wherein it has been observed that Sugarcane juice extracted from Sugarcane is thickened by dehydration (by boiling) and when it reaches a particular pigment, it takes the form of rab which is a semi-solid form of the sugarcane juice. The said rab is therefore distinct from molasses which is obtained as a residue on further processing of the rab by putting the rab into centrifugal machines and by the process of infusion of sulphur and obtaining khandsari in the dry powder/crystalised form. Hence rab shall attract GST @ 18% and not 28% (as molasses).

PRODUCT – BY-PRODUCTS OF MILLING OF DAL/ PULSES

• The GST council in its 48^th meeting has recommended to fully exempt the supply of by-products of milling of Dal/ Pulses such as Chilka, Khanda and Churi/Chuni with effect from the 1^st January, 2023 vide S. No. 102C of schedule of notification No. 2/2017- Central Tax (Rate), dated 28.06.2017.
• Further, in view of genuine doubts regarding the applicability of GST on subject goods, matters that arose during the intervening period (from 03.08.2022 to 31.12.2022 wherein Circular No. 179/11/2022-GST clarified that the said by-products are not cattle feed and hence shall attract GST @ 5%) are hereby regularized on “as is” basis in addition to the regularization of the similar issue for the period prior to 03.08.2022.

• The said clarification coupled with the express exemption shall bring respite to the milling industry which was grappling with the classification of the by-product as cattle feed or otherwise (based on end use).
• The regularization of the given issue on an “as is” basis right from 01.07.2017 shall imply that the exemption shall be available from inception. However, the tax if collected and paid during the said period till 31.12.2022 shall not be refunded.

PRODUCT – CARBONATED BEVERAGES OF FRUIT DRINK OR CARBONATED BEVERAGES WITH FRUIT JUICE

• On the basis of the recommendation of the GST council in its 45^th meeting, a specific entry has been created in notification No. 1/2017-Central Tax (Rate), dated the 28^th June, 2017 and notification No. 1/2017- Compensation Cess (Rate), dated the 28^th June, 2017, vide S. No. 12B in Schedule IV and S. No. 4B in Schedule respectively, with effect from the 1^st October, 2021, for goods with description ‘Carbonated Beverages of Fruit Drink’ or ‘Carbonated Beverages with Fruit Juice’.
• The applicable six-digit HS code for the aforesaid goods with the description ‘Carbonated Beverages of Fruit Drink’ or ‘Carbonated Beverages with Fruit Juice’ is HS 2202 99. The said goods attract GST at the rate of 28% and Compensation Cess at the rate of 12%.
• The S. Nos. 12B and 4B in the Schedule cover all such carbonated beverages that contain carbon dioxide, irrespective of whether the carbon dioxide is added as a preservative, additive, etc.
• In order to bring absolute clarity, an exclusion for the above-said goods has been provided in the entry at S. No. 48 of Schedule-II of notification No. 1/2017-Central Tax (Rate), dated 28^th June, 2017, vide notification No. 12/2022-Central Tax (Rate), dated the 30^th December, 2022.

• Disputes have been ongoing as regards the classification of Carbonated Beverages of Fruit Drink or Carbonated beverages with Fruit Juice. In the pre-GST era the Hon’ble Supreme Court in the case of Parle Agro (P) Ltd. V. Commissioner of Commercial Taxes, Trivandrum [2017-VIL-20-SC] in the context of classification of “Appy Fizz” applied the fruit juice quantity prescribed under the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 as well as the scientific reason for carbonation (i.e. for preservation or otherwise) for determining the treatment and classification of fruit juice based drinks (either as fruit juice or as carbonated beverages).
• The given clarification as well as the amendment (considered to be clarificatory by the Circular) seeks to put to rest the given controversy by indicating that ‘Carbonated Beverages of Fruit Drink’ or ‘Carbonated Beverages with Fruit Juice’ shall merit classification under HS 2202 99 attracting GST (with cess) @ 40% irrespective of the content of fruit juice or the purpose of the carbonation (preservative or otherwise).

PRODUCT – SNACK PELLETS MANUFACTURED THROUGH EXTRUSION PROCESS (SUCH AS ‘FRYUMS’)

• It is clarified that the snack pellets (such as ‘fryums’), which are manufactured through the process of extrusion, are appropriately classifiable under tariff item 1905 90 30, which covers goods with description ‘Extruded or expanded products, savoury or salted’, and thereby attract GST at the rate of 18% vide S. No. 16 of Schedule-III of notification No. 1/2017-Central Tax (Rate), dated the 28^th June, 2017.

• The given clarification appears to ignore Sr. No. 96 of Notification No. 2/2017-Central Tax (Rate), dated the 28^th June, 2017 which provides for exemption to “Pappad, by whatever name it is known, except when served for consumption” falling under the heading 1905.
• Hon’ble Supreme Court in the case of Shiv Shakti Gol Finger vs Asstt. Commissioner (1996) 9 SCC 514 has held that the word ‘Papad’ has been used as a genus and its species are made from pulses, rice, maida, potato, sago etc. and hence shall include papad in any shape.
• The given Circular also fails to provide reasons as to why the snack pellets (such as ‘fryums’) should not merit classification as ‘papad’.

PRODUCT – SPORTS UTILITY VEHICLES (SUVS)

• It is clarified that Compensation Cess at the rate of 22% is applicable on Motor vehicles, falling under heading 8703, which satisfy all four specifications, namely: –

1) these are popularly known as SUVs;

2) the engine capacity exceeds 1,500 cc;

3) the length exceeds 4,000 mm; and

4) the ground clearance is 170 mm and above.

• This clarification is in line with the express interpretation of S. No. 52B of Notification No. 01/2017 Compensation Cess (Rate), dated 28^th June, 2017 as well as the decision of AAAR in the case of Tata Motors Limited 2019 (31) G.S.T.L. 544 (Maharashtra).

PRODUCT – SPECIFIED GOODS IN CONNECTION WITH PETROLEUM OPERATIONS/COAL BED METHANE OPERATIONS

• On the basis of the recommendation of the GST Council in its 47^th Meeting, held in June 2022, the IGST rate has been increased from 5% to 12% on goods, falling under any Chapter, specified in the list annexed to the notification No. 3/2017-Integrated Tax (Rate), dated the 28^th June, 2017, when imported for the specified purpose (like Petroleum operations/Coal bed methane operations) and subject to the relevant conditions prescribed in the said notification. However, some goods specified in the list annexed to notification No. 3/2017-Integrated Tax (Rate), dated the 28^th June, 2017, are also eligible for a lower schedule rate of 5% by virtue of their entry in Schedule I of notification No. 1/2017-Integrated Tax (Rate), dated the 28^th June, 2017.
• Accordingly, it is hereby clarified that on goods specified in the list annexed to the notification No. 3/2017-Integrated Tax (Rate), dated the 28^th June, 2017, which are eligible for IGST rate of 12% under the said notification and are also eligible for the benefit of lower rate under Schedule I of the notification No. 1/2017-Integrated Tax (Rate), dated the 28^th June, 2017 or any other IGST rate notification, the importer can claim the benefit of the lower rate.

• The given clarification appears to be in line with the settled law that the taxpayer can choose any of the available entries which is beneficial when more than one entry is available (H.C.L. Limited vs Collector of Customs [2001 (130) ELT 405 (SC)].