Commercial identity of bentonite earthing compound determines classification as a prepared chemical product, not crude clay.

A bentonite-based earthing compound marketed as back fill material with wood charcoal, graphite and sodium sulphate was treated according to its commercial identity and functional use, not as crude bentonite clay. The AAR held that its composition and end use made it a prepared chemical product, classifiable under Heading 3824.99.17 rather than the clay entry. The ruling therefore placed the product in the higher GST rate category under the relevant rate notification and rejected application of the lower rate reserved for crude bentonite.

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Issues: Classification of bentonite powder used for electrical earthing and the applicable GST rate.

Analysis: The product used for electrical earthing was found to be commercially known as back fill compound, consisting of bentonite powder mixed with wood charcoal powder, graphite powder and sodium sulphate. On its composition and use, it was treated as a prepared chemical product used as a surface tension reducing agent and not as crude bentonite falling under the clay entry.

Conclusion: The product is classifiable under Heading 3824.99.17 and is taxable at 18% GST under Schedule III of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017.

Final Conclusion: The advance ruling settles the product classification in the higher tax bracket and rejects the claim for the lower rate.

Ratio Decidendi: A bentonite-based earthing compound, when marketed and used as a composite back fill material with added constituents, is classified according to its commercial identity and functional use under the heading for prepared chemical products rather than as crude bentonite clay.

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