Let us first see what is the matter of tax on the by- products of the Pulses/Dal Mills such as Chilka, Churi or Khanda. Till now it was considered, generally as exempted by considering these by-products as Cattle Feed as per entry No. 102 of Notification No. 2/2017. Now Government has come out with a clarification after 5 years of introduction of GST through a circular No. 179/11/2022-GST dated 3rd Aug. 2022 and it has changed the whole situation with respect to taxation of these by Products.
According to the clarification issued by CBIC by issuing a circular No. 179/11/2022-GST on August 3, 2022, these products are only used as ingredients in making cattle feed and these are not itself cattle feed. For this, their arguments have been given in this circular, in which it has also been told that these by-products have to go through some process to make cattle feed and in addition to this, according to this circular, Indian Standard 2052: 2019 also supports this opinion.
Thus, according to this circular, these by-products of pulse/Dal mills are taxable at the rate of 5 per cent as per entry number 103A of Schedule I. In this circular it is written that whatever happened in this regard before the issue of this circular should also be taken as “regular” till now so the effect of this clarification is not retrospective.
What is written in this circular has been explained by me in very simple Language but this circular also raises a very important question in itself and that is that cattle feed was exempted from tax only after some thought by our law makers at the time of introduction of GST in 2017 and now after 5 years with such clarification, the cost of cattle feed has been increased by making the main ingredients used in cattle feed taxable because the input credit of the tax levied on it will not be available since ITC is not available on the goods used in respect of tax free goods, so in many cases the purpose of tax exemption of cattle feed will suffer to some extend after this clarification .
In order to justify the tax exemption of cattle feed, the Lawmakers should once again consider the results of clarification issued by above circular and to avoid hardships and controversies, these by-products i.e. the churi / khanda/ chilka of Dal/pulse mills should be declared Exempted through a Separate Notification.
Author Bio
Sir,
Read my detailed Article titled “No Reversal of ITC on Goods Lost during Manufacturing Process: pub. in Tax Guru site on 6.1.2022 based on rule 42 & HC case law of ARS Steels & Alloy International Pvt. Ltd. v. State Tax Officer (2021) 35 J.K.Jain’s GST & VR 12, which covers by-Products also.. For further details, refer magazine (2022) 37 J.K.Jain’s GST & VR, page R-3.
CA Om Prakash Jain s/p J.K.Jain, Jaipur
Tel 9414300730/0141-3584043