Introduction: The recent ruling by the Karnataka Authority for Advance Rulings (AAR) in the case of n Re. M/s. Global Marketing [KAR ADRG 02/2024 dated January 29, 2024] sheds light on the GST implications concerning Tree Pruners. Dated January 29, 2024, the ruling clarifies that these agricultural tools, falling under HSN Code 8201 6000, are exempt from GST as per Entry No. 137 of Notification No. 2/2017-Central Tax (Rate).
The AAR Karnataka held that, Tree Pruners being an agricultural tool, would fall within the purview of HSN Code 8201 6000, and is therefore, exempt from levy of GST vide Entry No. 137 of Notification No. 2/2017-Central Tax (Rate) dated June 28, 2017 (“the Goods Rate Exemption Notification”).
Facts:
M/s. Global Marketing (“the Applicant”) is a partnership firm and is engaged in the business of purchase and sale of Tree Pruners. The product consists of a pole that is extendable in length and fitted with a knife, which is used in agricultural activities such as harvesting crops of areca, pepper, and coconut and spraying pesticides.
The Applicant has filed an application for advance ruling on whether the true pruners covered under HSN Code 8201 6000 are related to agricultural implements manually operated and animal-driven and therefore, being Agricultural Hand Tool i.e., Tree Pruners is exempt from levy of GST.
Issue:
Whether GST is leviable on supply of True Pruners?
Held:
The AAR Karnataka in the case of KAR ADRG 02/2024 held as under:
- Observed that, Chapter 82 of the Custom Tariff covers “tools. Implements, cutlery, spoons and forks, of base metal, parts thereof of base metal”. Tariff Heading 8201 covers “Agricultural implements manually operated, or animal driven i.e. Hand Tools” and Tariff Heading 8201 6000 covers “Hedge shears, two-handed pruning shears and similar two-handed shears products”.
- Further Observed that, the primary raw material of True Pruners is Aluminum, hence the classification would be based on usage or based on raw material i.e. articles of aluminum.
- Noted that, as per Entry No. 137 of the Goods Rate Exemption Notification, the Goods falling under Tariff Heading 8201 are exempt from levy of GST.
- Opined that, True Pruners used in plucking Areca Nut and Coconut Trees is an agricultural implement and in common parlance can be regarded as tool. Therefore, Tree Pruners would be classified as an agricultural implement/tool used in agriculture under Tariff Heading 8201 6000.
- Held that, True Pruners relating to Agricultural implements manually operated or animal driven would fall within the purview of HSN Code 8201 6000 and are therefore, exempt from levy of GST vide Entry No. 137 of the Goods Rate Exemption Notification.
Conclusion: The Karnataka AAR’s ruling provides clarity on the GST treatment of Tree Pruners, establishing their exemption under HSN Code 8201 6000. This decision has significant implications for businesses involved in the supply chain of these agricultural tools. Understanding the correct classification and associated GST exemptions is crucial for compliance and financial planning in the relevant sectors. Importantly, this ruling emphasizes the importance of considering both raw material composition and usage characteristics in the classification of goods under the GST framework. Businesses dealing with similar products should take note of this ruling to ensure adherence to applicable GST regulations.
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