Classification of "Modelling Dough" under GST Act: Chapter 34 prevails over Chapter 95, subject to 18% GST.

The case involved determining the appropriate classification and GST rate for "Modelling Dough" under the Central Goods and Services Tax Act. The applicant argued for classification under Chapter 95 as a toy, while the officer contended it should be classified under Chapter 34 due to its chemical composition. The final judgment classified "Modelling Dough" under CTH 3407 of the Customs Tariff Act, 1975, with an applicable GST rate of 18% (9% CGST).

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Issues Involved:
1. Appropriate classification and rate of GST applicable on the supply of "Modelling Dough" under the Central Goods and Services Tax Act, 2017.

Detailed Analysis:

Applicant's Contentions:
1. Product Description: The applicant, engaged in the manufacture of various products taxable under GST, describes "Modelling Dough" as a semi-solid, clay-like structure made from 'maida' (refined wheat flour) used as a toy for children to create various shapes.

2. Classification Ambiguity: The applicant highlights an anomaly in the Customs Tariff and GST Tariff Schedules regarding the classification of "Modelling Dough." The product could be classified under Chapter 34 (Heading 34.07) or Chapter 95 (Heading 95.03).

3. Customs Tariff Chapter 34: Chapter Heading No. 34.07 falls under Section VI, which covers "Products of the Chemical or Allied Industries." The applicant argues that their product, made from 'maida', is neither a chemical nor a product of any allied industry, thus should not be classified under this section.

4. Competitors’ Classification: Competitors classify similar products under Chapter 95 (Heading 95.03) as "Toys," attracting a lower GST rate of 12% (6% CGST).

5. Request for Clarification: Due to the prevailing ambiguity and its impact on fair competition and market practices, the applicant seeks an advance ruling for the correct classification and applicable GST rate.

Concerned Officer’s Contentions:
1. Lack of Information: The applicant did not provide sufficient information, such as samples, photographs, and detailed manufacturing processes, crucial for determining the correct classification.

2. Essential Characteristics: The officer argues that the essential characteristics of "Modelling Dough," such as elasticity, pliability, and non-perishable nature, are provided by chemicals, not 'maida'. Therefore, the classification should depend on these chemicals.

3. Specific vs. General Classification: The officer suggests that if the product fits under both Chapter 34 and Chapter 95, it should be classified under the more specific heading, i.e., 34.07.

Hearing and Observations:
1. Product Ingredients: The applicant provided a detailed list of ingredients, revealing that the product consists of 'maida', water, and various chemicals.

2. Custom Tariff Headings:
- Heading 34.07: Covers "Modelling pastes, including those put up for children's amusement."
- Heading 95.03: Covers various toys, including those made of wood, metal, and plastics.

3. Chemical Composition: The product contains significant chemicals that provide necessary properties like firmness, elasticity, and non-perishability, aligning it with products under Section VI for "Products of the Chemical or Allied Industries."

4. HSN Explanatory Notes: The notes for Heading 34.07 describe "modelling pastes" as plastic preparations, generally used by artists or children for amusement. The term "plastic" here refers to the material's malleability and flexibility, not necessarily polymers.

5. Differentiation of Terms: The term "plastic" as used in Chapter 34 should be understood in its broader sense, denoting malleability and flexibility, rather than being restricted to polymers as defined in Chapter 39.

Final Judgment:
- Classification: The product "Modelling Dough" is classified under CTH 3407 of the Customs Tariff Act, 1975.
- GST Rate: As per Schedule III of Notification No. 1/2017-Central/State Tax (Rate), the applicable GST rate is 18% (9% CGST).

Order:
For reasons discussed, the product "Modelling Dough" will be covered under CTH 3407 under the Customs Tariff Act, 1975.

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