2019 (10) TMI 157 - AAR - GST

Agricultural products classified under different GST rates based on organic certification and growth regulator content

In Re: M/s. M/s. Alligo Agrovet Private Limited

AAR Maharashtra classified various agricultural products for GST purposes. Seven products (AUTUS, SJ-NINJA, SJ-ERASER, OPRAX, TELNAR, VK's NEMO, and ... Classification of goods - rate of GST - AUTUS - SJ-NINJA - SJ-ERASER - OPRAX - TELNAR - VK’s NEMO - STRESSOUT - SHYAM SAMRUDDHI - goods are Otganic Fertilizers or not. Product AUTUS - HELD THAT:- Autus satisfy all the ingredients of plant growth regulators (PGR) and therefore classifiable under Tariff Heading 3808 with applicable GST @ 18%. Product SHYAM SAMRIDDHI - HELD THAT:- The plant nutrient such as N, P, K are derived from organic source. The product is also certified by the Accredited Certified Agency as Organic Products. The product does not contain any other growth regulator as suchh the product is Organic fertilizer classifiable under HSN 3105 and liable to GST @ 5% as per Sr. No. 182D of Schedule-I of N/N. 1/2017-CT (Rate) dated 28.06.2017. PRODUCT SJ-NINJA - HELD THAT:- From the mode of action and the salient feature of the products, it is found that the product satisfy all the attributes of an insecticide and hence the produce is an insecticides covered by HSN 3808 liable to GST @ 18%. Product SJ-ERASER - HELD THAT:- From the use of product, it can be concluded that the product is an organic insecticide falls under HSN code 3808. Further, the presence of nutrient in small quantity will not alter the essential character of the product as an insecticide liable to GST @ 18%. Product QPRAX - HELD THAT:- The product is an Organic Fungicide falling under HSN 3808 liable to GST @ 18%. Product TELNAR - HELD THAT:- The product is advertised by the appellant as broad spectrum organic bactericide. There is no doubt that the product is Organic Bactericide-Pesticide covered under Tariff Heading 3808 liable to GST @ 18%. Product VK's NEMO - HELD THAT:- From the literature and the use of product, it can be said that the product is nematocides covered under Tariff Heading 3808 liable to GST @ 18%. Product STRESSOUT - HELD THAT:- Having regard to publicity literate, its content, the mode of action, the product falls under HSN Code 3808 @ 18%. For classification, reliance placed in the case of KULKARNI BLACK AND DECKER LTD. VERSUS UNION OF INDIA [1991 (7) TMI 95 - HIGH COURT OF JUDICATURE AT BOMBAY] where it was held that The classification cannot be based only upon what is stated in the pamphlets but the contents of the pamphlets are certainly one of the relevant circumstance which can be taken into consideration while determining classification. Thus, Products namely AUTUS, SJ-NINJA, SJ-ERASER, OPRAX, TELNAR, VK’s NEMO AND STRESSOUT are classifiable under HSN Code-3808 and liable to GST (SGST CGST 9% as per Notification-1 of 2017-CT (Rate) dated 28.06.2017 each respectively. The product SHYAM SAMRUDDHI is an organic fertilizer classifiable under HSN-3105 and liable to GST @5% as per Sr. No.182D of Schedule-I of Notification-1 of 2017-CT (Rate) dated 28.06.2017. 1. ISSUES PRESENTED and CONSIDEREDThe core legal question considered by the Authority for Advance Ruling (AAR) was the classification of various agricultural products manufactured by the applicant under the Harmonized System of Nomenclature (HSN) and the applicable Goods and Services Tax (GST) rate for these products. Specifically, the issue was whether these products should be classified as organic fertilizers under HSN 3101 or 3105, or as plant growth regulators or pesticides under HSN 3808.2. ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The classification of goods under the GST regime is guided by the Customs Tariff Act, 1975, which aligns with the Harmonized System of Nomenclature (HSN). The relevant chapters considered were:HSN 3101: Animal or vegetable fertilizers, whether or not mixed together or chemically treated.HSN 3105: Mineral or chemical fertilizers containing two or three of the fertilizing elements nitrogen, phosphorus, and potassium.HSN 3808: Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products, and plant growth regulators.Court's interpretation and reasoning:The AAR analyzed each product based on its composition, intended use, and the applicant's submissions. The AAR considered the definitions and characteristics of fertilizers, plant growth regulators, and pesticides to determine the appropriate classification.Key evidence and findings:The applicant provided certificates from accredited agencies certifying the products as organic. The products were described as containing various organic and micronutrient elements intended to enhance plant growth and immunity. However, the AAR also considered the product literature and marketing materials, which described some products as having pesticidal or plant growth regulatory effects.Application of law to facts:The AAR applied the definitions and characteristics of fertilizers and plant growth regulators to the products in question. For products like AUTUS and SJ-NINJA, which showed characteristics of plant growth regulators or insecticides, the AAR classified them under HSN 3808. For SHYAM SAMRUDDHI, which was primarily a nutrient provider without pesticidal claims, the AAR classified it under HSN 3105.Treatment of competing arguments:The applicant argued that the products should be classified as organic fertilizers due to their nutrient content and certification. However, the AAR considered the broader characteristics and intended effects of the products, leading to a classification that aligned with their functional use as per the product literature.Conclusions:The AAR concluded that products with characteristics of plant growth regulators or pesticidal effects should be classified under HSN 3808, while those serving primarily as fertilizers should be classified under HSN 3105.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:'The classification cannot be based only upon what is stated in the pamphlets but the contents of the pamphlets are certainly one of the relevant circumstances which can be taken into consideration while determining classification.'Core principles established:The AAR established that the classification of products under GST should consider the functional characteristics and intended use of the products, as evidenced by both their composition and marketing materials.Final determinations on each issue:Products AUTUS, SJ-NINJA, SJ-ERASER, OPRAX, TELNAR, VK's NEMO, and STRESSOUT were classified under HSN Code 3808 and subjected to GST at 18%.Product SHYAM SAMRUDDHI was classified as an organic fertilizer under HSN 3105 and subjected to GST at 5%.