Wood waste classification and taxable toleration payments under GST clarified, while reverse charge was denied for mandi fee on wood purchases.

Residue from wood peeling was treated as manufacturing waste and classified under Chapter Heading 4401 as wood waste or scrap, attracting GST at 5%. Amounts forfeited on failure to pay the auction balance, and penalties recovered for damage caused by labour, were treated as consideration for tolerating an act and classified as service code 9997 94, attracting GST at 18%. Mandi fee paid on wood purchases from an unregistered person was held not to attract GST under reverse charge. The question on refund of GST relating to bad debts and transit loss was found to be outside advance ruling jurisdiction, and no ruling was issued on that issue.

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Issues: Whether residue left after peeling of wood is classifiable as wood waste or scrap and the applicable GST rate; whether forfeited security amount is a taxable supply and, if so, its classification and rate; whether refund of GST on bad debts and goods lost or destroyed in transit falls within advance ruling jurisdiction; whether mandi fee on purchase of wood attracts GST under reverse charge; and whether penalty recovered for damage of material by labour is taxable.

Issue (i): Whether residue left after peeling of wood is classifiable as wood waste or scrap and the applicable GST rate.

Analysis: The residue left after the peeling process was treated as manufacturing waste rather than timber. It was found to fall within Chapter Heading 4401 covering wood waste and scrap, and not within any timber classification. The classification was linked to the nature of the residue and its use for paper manufacturing and fuel.

Conclusion: The residue is classifiable under Chapter Heading 4401 31 00 or 4401 39 00 and attracts GST at 5%.

Issue (ii): Whether forfeited security amount is a taxable supply and, if so, its classification and rate.

Analysis: Forfeiture was treated as consideration for tolerating the failure to pay the balance amount for auctioned wood. The ruling applied the expanded meaning of supply and treated the forfeiture as an agreed toleration of an act within Schedule II, falling under service classification 9997 94.

Conclusion: The forfeited amount is taxable as a service under Service Code 9997 94 and attracts GST at 18%.

Issue (iii): Whether refund of GST on bad debts and goods lost or destroyed in transit falls within advance ruling jurisdiction.

Analysis: The question was found to lie outside the matters specified for advance ruling under the governing provision.

Conclusion: No ruling was given on this issue.

Issue (iv): Whether mandi fee on purchase of wood attracts GST under reverse charge.

Analysis: Mandi fee was treated as part of the value of supply, but wood was not a notified category for reverse charge under the cited provisions. The ruling also noted the limited operation of the earlier exemption structure and the change in the reverse charge regime.

Conclusion: Mandi fee paid on purchase of wood from an unregistered person does not attract GST under reverse charge.

Issue (v): Whether penalty recovered for damage of material by labour is taxable.

Analysis: The penalty was treated as consideration for tolerating an act and placed under the same service classification applied to forfeiture.

Conclusion: The penalty amount is taxable as a service under Service Code 9997 94 and attracts GST at 18%.

Final Conclusion: The ruling partly accepted the applicant's position on mandi fee, while upholding taxability and classification of the wood residue, forfeiture amount, and penalty recovery, and declining to answer the bad-debt and transit-loss refund question.

Ratio Decidendi: Where an amount is received for tolerating a situation or failure to perform, it constitutes a taxable service; residue from manufacturing that is not usable as timber is classifiable as wood waste or scrap; and only questions within the statutory advance ruling jurisdiction can be answered.

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