2018 (7) TMI 965 - AAR - GST

Classification of Bio-Fertilizers: GST Exemption vs. Taxable at 5%

The ruling determined that Bio-Fertilizers without a brand name in unit containers are exempt from GST, while those with a brand name are taxable at 5% ... Classification of goods - Bio Fertilizer - rate of GST - Whether the Bio Fertilizer covered under the definition of Organic Manure (HSN code 3101) and What is the rate of GST applicable on Bio Fertilizer if it is not covered under Organic Manure (HSN Code: 3101)? Held that:- Bio fertilizer is a substance which contains living micro organisms which, when applied to the seed, plant surfaces or soil colonizes the rhizosphere or the interior of the plant and promotes growth by increasing the supply or availability of primary nutrients to the host plant. Bio-fertilizers add nutrients through the natural processes of nitrogen fixation, solubilizing phosphorus, and stimulating plant growth through the synthesis of growth-promoting substances. Bio-Fertilizers, other than those put up in Unit Container and bearing a brand name will covered under Schedule I of rate of GST on Goods and would attracts NIL rate of duty and if the Bio-Fertiliser is put up in Unit Container and bears a brand name, it would be taxable under GST @ 5%. Ruling:- The goods (Bio Fertilizer or Organic Manure); other than those put up in Unit Container and bearing a brand name; will be covered under Schedule I of rate of GST on Goods and attracts NIL rate of duty & The goods (Bio Fertilizer or Organic Manure); put up in Unit Container and bearing a brand name, will be taxable under GST @ 5%. Issues involved:1. Whether Bio Fertilizer is covered under the definition of Organic Manure (HSN code 3101)2. What is the rate of GST applicable on Bio Fertilizer if it is not covered under Organic Manure (HSN Code: 3101)Analysis:The applicant, engaged in manufacturing Bio-Fertilizers, sought an Advance Ruling on the classification and GST rate applicable. The applicant defined Biofertilizer as a product containing living microorganisms beneficial for soil and crop productivity. The main issue was whether Bio Fertilizer falls under Organic Manure and the corresponding GST rate.During the personal hearing, the applicant reiterated their submission, emphasizing the definition of Biofertilizer. The jurisdictional officer clarified that Bio Fertilizers do not fit the Organic Fertilizers definition and are taxable at 5% GST if in unit containers with a brand name under Tariff Item 3101.The ruling analyzed Bio-Fertilizers' composition, including microorganisms like Rhizobium, Azospirillum, and Mycorrhiza, which promote plant growth through natural processes. It referenced the GST Schedule I and Schedule IV, stating that Bio-Fertilizers made of microorganisms are classified under HSN Code 3101. A Supreme Court judgment classified a similar product as a plant growth promoter under sub-heading 3101.00 with nil duty.The ruling concluded that Bio-Fertilizers not in unit containers with a brand name are exempt from GST, while those in unit containers with a brand name are taxable at 5% GST. Therefore, the final ruling specified that Bio Fertilizers or Organic Manure without a brand name in unit containers are exempt from GST, whereas those with a brand name are taxable at 5% GST.