GST on Distillers Wet Grain Solubles (DWGS)

ARA, Rajasthan has pronounced judgment on 25.10.2021, in the case of ADS Agro Industries Pvt. Ltd. (2021) 36 J.K.Jain’s GST & VR 416, that;

‘Distillers Wet Grain Solubles (DWGS), which is sold as Cattle Feed, is a kind of brewing or distilling dregs & waste. It is classified under Tariff Entry 2303 of GST Tariff & taxable @5% (2.5%+2.5%)’

GST on Distillers Wet Grain Solubles (DWGS)

1. Background.─The applicant company in their written submission stated that company is a 100% grain-based distillery and manufacturing Alcohol using Grains as raw material. The Applicant Company while manufacturing Alcohol, produces DWGS (Distillers Wet Grain Solubles) in Wet Form also termed as “Wet Cake” in the Industry. During distillation process, only the starch portion present in the Grain is utilized in production of the Alcohol, which is the main product, and the other components viz., protein, fibre and oil are not utilized in the production of Alcohol. Another by-product is obtained by further extraction, processing and conversion into Wet Cake, which is Cattle Feed/Poultry Feed.

The applicant wants to seek clarification whether DWGS is by-product or residues and also seek classification thereof.

2. Findings by ARA.─The CGST rates on goods as per notfn No.1/2017-CT(R), dated 28.6.2017, as amended from time to time (as on 31.3.2021):‒

S. No. Sub-heading Description of Goods Rate
104 2303 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 2.5%

CGST rates on goods as per notfn No.2/2017-CT(R), dated 28.6.2017, as amended from time to time:

S.No Sub-heading Description of Goods Rate
102 “2301,2302,

2308, 2309”

“Aquatic feed including shrimp feed and prawn feed, poultry feed & cattle feed, including grass, hay & straw, supplement & husk of pulses, concentrates & additives, wheat bran & de-oiled cake other than rice bran” NIL

3. Analysis by ARA.─On gone through the above notfn No.2/2017-CT(R), dated 28.6.2017 (as amended from time to time), the ARA were of the view that relevant key element/ingredients of entry No. 102 of the said notfn are as under:‒

Aquatic feed including shrimp feed and prawn feed, poultry feed & cattle feed, including grass, hay & straw, supplement & husk of pulses, concentrates & additives, wheat bran & de-oiled cake other than rice-bran”

The ARA found that entry no. 102 of the said notfn clarifies the picture of feeds, supplement & husk of pulses, concentrates & additives, wheat bran & de-oiled cake etc. As far as relevancy of term ‘cattle feed’ in the case, it is opinioned that DWGS cannot be categorized as cattle feed mere being slight valuable in the market and mere installation of huge machinery for its production items/description of goods falling under entry No. 102 is quite different from DWGS and only for the purpose of just availing the benefits of exemption under notfn No.2/2017-CT(R), dated 28.6.2017, it cannot be termed as ‘cattle feed’. Entry No. 102 of the said notfn is separate entry and items pertaining to this entry do not fit in the frame as by-product or residue whatever name it called of brewery, generated during the process of manufacturing of alcohol.

The ARA were of the view that relevant key element/ingredients of Entry No. 104 of the notfn No.1/2017-CT(R), dated 28.6.2017, (as amended from time to time) are as under:‒

  • Residues of starch manufacture and similar residues
  • brewing or distilling dregs and waste,

As per meaning provided in Wikipedia, the Brewing is the production of beer by steeping a starch source (commonly cereal grains, the popular of which is barley/wheat) in water and fermenting the resulting sweet liquid with yeast.

In the instant case, it is fact that in the process of manufacturing of Alcohol, the starch portion present in the wheat grain is utilized through distillation process. Means ‘starch present in the wheat grain’ is being processed in brewery. Hence, main key element i.e., ‘starch’ is present here.

Further, the applicant company is a kind of brewery where brewing or distilling process are being undertaken. In the result of manufacturing process of alcohol, several residues, dregs and waste are come into picture.

As far as nature of DWGS (Distillers Wet Grain Solubles) is concern, it is nothing but brewing or distilling dregs and waste as it is come out in the picture as a result of brewing or distilling process.

As per the Explanatory Notes to the HSN, heading 2303 includes residues of starch manufacture and similar residues (from maize (corn), rice, potatoes, etc.); beet pulp; bagasse; other waste products of sugar manufacture; brewing or distilling dregs and waste, which comprises in particular-dregs of cereals obtained in the manufacture of beer and consisting of exhausted grains remaining after the wort has been drawn off malts sprouts separated from the malted grain during the kilning process; spent hops; Dregs resulting from the distillation of spirits from grain, seeds, potatoes, etc; beet pulp wash (residues from the distillation of beet molasses).All these products remain classified in the heading whether presented in wet or dry.

4. Conclusion by ARA.─In view of above, the ARA found that DWGS (Distillers Wet Grain Solubles) is an inevitable outcome in the process of manufacturing of Alcohol. Apart from nomenclature whether it is residue or by-product, the ARA found that it is a kind of brewing or distilling dregs & waste and is classifiable under Chapter Heading/Sub-heading/Tariff item 2303 of GST Tariff.

5. Ruling by ARA.─Question A: Whether in the facts and circumstances of the case elaborated in body of ground hereunder, DWGS is by-product or residues?

Answer A:‒It is a kind of brewing or distilling dregs & waste.

Question B:‒Whether “DWGS” is to be classified under Tariff Entry 2309 of GST Tariff?

Answer B:‒No.

Question C:‒Whether in the facts and circumstances of the case, DWGS” which is sold as Cattle Feed in the Trade are to be classified under Tariff Ent1y 2309 of GST Tariff?

Answer C:‒No. “DWGS” is to be classified under Chapter/Heading/ Sub-heading/Tariff item 2303 of GST Tariff.

Author Bio

Qualification: LL.B / Advocate
Company: self
Location: Jaipur, Rajasthan, India
Member Since: 08 Apr 2020 | Total Posts: 24
I am s/o J.K.Jain , Jaipur & is Writer & Analyst of Fortnightly magazine "J.K.Jain's GST & VR". Expert in Commentary of GST/VAT View Full Profile

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