GST on Geo Membrane for Waterproof Lining fabrics (Pond Liner)

In re Ananta Synthetic Innovations (GST AAR Gujarat)

The classification of the product manufactured and supplied by the applicant M/s. Ananta Synthetic Innovations, Survey No.345, Ananda Viramgam Medaadraj road, Manipur, Kadi, Mehsana-382728 (as per the First Schedule to the Customs Tariff Act, 1975(51 of 1975)) as well as the corresponding rate of GST (as per Notification No.01/2017-Central Tax(Rate)) dated 28.06.2017 (as amended from time to time) is as detailed in the table below:

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, GUJARAT

BRIEF FACTS

The applicant M/s. Ananta Synthetic Innovations, Survey No.345, Ananda Viramgam Medaadraj road, Manipur, Kadi, Mehsana-382728 are manufacturers and suppliers of the product namely “Geo Membrane for Waterproof Lining fabrics” which is used for Water Proof Lining of Ponds, Canals and other Water storage places. The applicant has submitted that the said product is also referred to as Pond Liners and is specific Laminated High Density Polyethylene Woven Geo-membrane for water proof lining which is manufactured specifically as per Indian Standard prescribed under IS:15351:2015 and are used primarily for farming water and as liners for water ponds, canals, water pits etc., for storage of water bodies. In the States with scanty rain fall, the said pond liners are primarily used for the agricultural sector for water preservation.

2. The applicant has submitted that they, as a manufacturer of Geo Membrane for Water Proof Lining fabrics have sought classification of the same under HSN 59039090 and have submitted the brief manufacturing process for the said product as under:

(a) Tape/Strip Extrusion: Tapes/Strips are manufactured from raffia grade HDPE granules which shall be UV stabilized by incorporating suitable carbon black, UV and Additives. Granules are then extruded through sheet die to produce solid sheet which is further uniformly slitted into number of tapes. These tapes are then passed through hot air oven for twist stretching with proper orientation to the tapes to achieve the required tape width and desired strength. Width of the tape/strip is between(4.1 mm to 4.3 mm) and the Linear Density of the tape/strip is 1500 to 2400 Denier. Tapes/strips are wound on bobbins for further processing.

(b) Fabric weaving: HDPE woven fabrics are manufactured on Circular or Flat looms. As per design of woven fabric, Warp and Weft tapes are loaded accordingly. These tapes are then passed through Machine Direction and Cross Direction accordingly to weave the fabric.

(c) Film Extrusion: Film is manufactured from Polyethylene (PE) granules and required suitable UV stabilizer is added. Granules are then extruded through circular die to produce blowing film which further uniformly passed through take up roller to get the required film width & micron. Tubular film is made on surface winder and it flattens with help of guide roller.

(d) Lamination Coating: The HDPE woven fabric is laminated on both sides with LDPE with suitable combination of LLDPE. The coating film is UV stabilized by incorporating 2.5 + 0.5 per cent of carbon black with uniform dispersion. HDPE woven fabric is bonded with single side or both side LDPE coating. Similarly other side of the fabric is bonded together by sandwich lamination. For sandwich lamination, HDPE woven fabric is bonded with LDPE coating and LDPE liner film. The roll is ready for sealing process.

(e) Sealing: Two or more pieces of geomembrane fabrics are used, the Geomembrane are joined/seamed together by a suitable heat air blower sealing process keeping an overlap as per standard sealing process.

Based on the above manufacturing process, the applicant also submits that the coating/impregnation/lamination can be seen with naked eye, and hence, as per chapter note 2, the manufactured goods should fall under HSN 59039090.

3. The applicant has submitted that the product Geo Membrane for Water Proof Lining fabrics would get covered under HSN 59039090 for the following reasons:

The Chapter Note 2 of the Chapter 59 reads as under:

2. Heading 5903 applies to:

(a) textile fabrics, impregnated, coated, covered or laminated with plastics, whatever the weight per square metre and whatever the nature of the plastic material (compact or cellular), other than:

fabrics in which the impregnation, coating or covering cannot be seen with the naked eye (usually Chapters 50 to 55, 58 or 60); for the purpose of this provision, no account should be taken of any resulting change of colour;

products which cannot, without fracturing, be bent manually around a cylinder of a diameter of 7 mm, at a temperature between 15oC and 30oC (usually Chapter 39);

products in which the textile fabric is either completely embedded in plastics or entirely coated or covered on both sides with such material, provided that such coating or covering can be seen with the naked eye with no account being taken of any resulting change of colour (Chapter 39);

fabrics partially coated or partially covered with plastics and bearing designs resulting from these treatments (usually Chapters 50 to 55, 58 or 60);

plates, sheets or strip of cellular plastics, combined with textile fabric, where the textile fabric is present merely for reinforcing purposes (Chapter 39); or

textile products of heading 5811;

(b) fabrics made from yarn, strip or the like, impregnated, coated, covered or sheathed with plastics, of heading 5604.

4. The applicant has submitted that the Chapter Note 7 of Chapter 59 reads as under:

Heading 5911 applies to the following foods, which do not fall in any other heading of Section XI:

(a) textile products in the piece, cut to length or simply cut to rectangular (including square)shape (other than those having the character of the products of headings 5908 to 5910), the following only:

textile fabrics, felt and felt-lined woven fabrics, coated, covered or laminated with rubber, leather or other material, of a kind used for card clothing, and similar fabrics of a kind used for other technical purposes, including narrow fabrics made of velvet impregnated with rubber, for covering weaving spindles (weaving beams);

bolting cloth;

straining cloth of a kind used in oil presses or the like, of textile material or of human hair;

flat woven textile fabrics with multiple warp or weft, whether or not felted, impregnated or coated, of a kind used in machinery or for other technical purposes;

textile fabrics reinforced with metal, of a kind used for technical purposes;

cords, braids and the like, whether or not coated, impregnated or reinforced with metal, of a kind used in industry as packing or lubricating materials;

(b) textile articles (other than those of headings 5908 to 5910) of a kind used for technical purposes [for example, textile fabrics and felts, endless or fitted with linking devices, of a kind used in paper making or similar machines (for example, for pulp or asbestos-cement), gaskets, washers, polishing discs and other machinery parts].

5. The applicant has further submitted that in the case of Advance Ruling filed by THE RUBY MILLS LTD., cited in 2020 (38) G.S.T.L. 206 (AAR-GST-UK), before the AAR, Uttarakhand, it was held that,

“6.2 In this context, the relevant chapter note of CHAPTER 59(Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use) of the GST Tariff is reproduced as under-

“2. Heading 5903 applies to:

(a) textile fabrics, impregnated, coated, covered or laminated with plastics, whatever the weight per square metre and whatever the nature of the plastic material (compact or cellular), other than:

fabrics in which the impregnation, coating or covering cannot be seen with the naked eye (usually Chapters 50 to 55, 58 or 60); for the purpose of this provision, no account should be taken of any resulting change of colour;

products which cannot, without fracturing, be bent manually around a cylinder of a diameter of 7 mm, at a temperature between 15oC and 30oC (usually Chapter 39);

products in which the textile fabric is either completely embedded in plastics or entirely coated or covered on both sides with such material, provided that such coating or covering can be seen with the naked eye with no account being taken of any resulting change of colour (Chapter 39);

fabrics partially coated or partially covered with plastics and bearing designs resulting from these treatments (usually Chapters 50 to 55, 58 or 60);

plates, sheets or strip of cellular plastics, combined with textile fabric, where the textile fabric is present merely for reinforcing purposes (Chapter 39); or

textile products of heading 5811;”

6.3 On perusal of the Note 2 to Chapter Heading 5903, we find that the said heading covers textile fabrics, impregnated, coated, covered or laminated with plastics. Such products are classified here whatever the weight per square meter and whatever the nature of the plastic component (compact or cellular) provided that in the case of impregnation, coating or covered fabrics, impregnation, coating or covering can be seen with the naked eye. The textile fabrics in which impregnation, coating or covering cannot be seen with the naked eye usually fall in 50 to 55, 58 or 60.

6.4 In the present case, we find that the applicant in their submission has admitted that this coating pattern can be seen with the naked eye and the same fact is also confirmed by the concerned officer of SGST-Uttarakhand in his report dated 30.01.2020, therefore the product in question merit classification under Chapter 5903 of GST Tariff Act, 2017.”

6. The applicant has submitted that they place reliance on the ration of the above judgement and also prayed to classify the said manufactured goods under HSN 59039090. They have asked the following question seeking Advance Ruling on the same:

“Whether the Geo Membrane for Water Proof Lining Fabrics which is technically “Textile Fabrics made of strips and laminated/coated/covered/sheathed with plastics of width not exceeding 5mm and such impregnation/coating/covering/lamination can be seen with naked eye”, can be classified as “Textile Fabrics, Impregnated, coated, covered or laminated with plastics” under HSN 59039090 with IGST @ 12% (CGST@6% + SGST@6%)

OR

Whether the Geo Membrane for Water Proof Lining Fabrics which is technically “Textile Fabrics made of strips and laminated/coated/covered/sheathed with plastics of width not exceeding 5mm and such impregnation/coating/ covering/lamination can be seen with naked eye”, and is put to use for technical purposes, can be classified as “Textile products and articles, for technical uses, specified in note 7 to this chapter” under HSN 59119090 with IGST@12% (CGST@6% + SGST@6%)”

DISCUSSION & FINDINGS:

7. We have considered the submissions made by the applicant in their application for advance ruling as well as the arguments/discussions made by their representative Shri Subramanya V Rayaprol at the time of personal hearing. We have also considered the issues involved on which Advance Ruling is sought by the applicant.

8. At the outset, we would like to state that the provisions of both the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to similar provisions of the GGST Act.

9. Based on the submission of the applicant as well as the arguments/discussions made by the representative of the applicant during the course of personal hearing, we find that the issue to be decided is the classification of their product “Geo Membrane for Water Proof Lining Fabrics” manufactured and supplied by the applicant (also referred to as Pond Liner) which is used for Water Proof Lining of Ponds, Canals and other Water storage places, and the GST liability of the said product. In order to determine the tax liability on said goods, we will be required to refer to the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 containing the headings, sub-headings as well as the rates of Central Tax GST applicable to various goods which are covered under 6 schedules as under:

(i) 2.5 per cent. in respect of goods specified in Schedule I,

(ii) 6 per cent. in respect of goods specified in Schedule II,

(iii) 9 per cent. in respect of goods specified in Schedule III,

(iv) 14 per cent. in respect of goods specified in Schedule IV,

(v) 1.5 per cent. in respect of goods specified in Schedule V, and

(vi) 0.125 per cent. in respect of goods specified in Schedule VI

Further, Explanation (iii) and (iv) of the said Notification reads, as under:

(iii) “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).

(iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification.

10. We will therefore, be required to refer to the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) in order to find out the correct classification of the said products. Also, since the applicant in his question seeking Advance Ruling wants to know whether their product falls under 59039090 or 59119090, we find it imperative to refer to Headings 5903 and 5911 falling under Chapter 59 (Man-made filaments; strip and the like of man­made textile materials). Headings 5903 and 5911 read as under: