2021 (1) TMI 543 - AAR - GST

Classification of Fertilizers for GST: Organic Manure, Bio-fertilizers, Nitrogenous & Mixture Fertilizers

In Re: M/s. GB Agro Industries,

The court ruled on the classification of various types of fertilizers. 'Organic Manure' was classified under Chapter sub-heading No. 31059090, taxable at ... Classification of goods - HSN Code - Organic Manure - Bio-fertilizers - Granulated Nutrient Mixture - Phosphatic Rich Fertilizers - whether these products are correctly classifiable under Sub-heading nos. 3101, 3101, 3102 & 3105, respectively? - Benefit of N/N. 01/2017-Central Tax (Rate) dated 28.06.2017. Organic Manure - HELD THAT:- The ingredients viz. Sulphur Powder, Rock Phosphate and Bentonite, Gypsum, Potassium Humate and Bio-Fulvic are certainly not covered under the Animal or Vegetable products. For the product to be covered under Chapter head 3101 it is of vital importance that the product should necessarily be either direct animal or vegetable fertilisers such as ‘manure’ whether mixed together and chemically treated or otherwise and those obtained by mixing or chemical treatment of animal or vegetable products - composition of the product contains Amino Acids (Bio-culture amino acids). The key elements of an amino acid are carbon (C), hydrogen (H), oxygen (O), and nitrogen (N), although other elements are found in the side chains of certain amino acids. Thus, the presence of nitrogen in the product is visible. Further, it contains Potassium Humate and as such the presence of potassium is also visible. Rock Phosphate which is also one of the components of the product is a non-detrital sedimentary rock that contains high amounts of phosphate minerals. Thus, the product also contains phosphate elements. In addition, the product contains minerals viz. Sulphur Powder and Bentonite. Thus, it is seen that the product is a mixture of animal or vegetable products, minerals, nitrogen, phosphate and potassium - the product merits classification under Tariff Item No. 31059090-Other, of the First Schedule to the Customs Tariff Act, 1975(51 of 1975). If said products are clearly used as fertilizers, it will be covered under Entry at Sl. No.182D of Schedule-I of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 of the CGST Act, 2017 on which total rate of GST chargeable will be 5%. Bio-fertilizers - HELD THAT:- The entire portion of the description of goods except ‘cultures of micro-organisms (excluding yeasts)’ pertains to the medical field. On going through the said Sub-heading 3002, it is seen that ‘cultures of micro-organisms (excluding yeasts)’ appears at Tariff Entry No.30029030 of the First Schedule of the Customs Tariff Act, 1975 (51 of 1975). Further, as per Vikaspedia, bio-fertilizers are produced by culturing of microorganisms and that such cultured microorganisms packed in some carrier material for easy application in the field are called bio fertilisers. Thus, it can be seen that bio-fertilizers are produced by culturing of micro-organisms which is covered by the Entry ‘cultures of micro-organisms(excluding yeast)’ which falls under Sub-heading No.30029030 - the product, “Bio-fertilizers” manufactured and supplied by the applicant are classifiable under Tariff item No.30029030 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975) and covered under Entry at Sl. No.61 of Schedule-II of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 of the CGST Act, 2017 on which total rate of GST chargeable is 12%. Nitrogenous Mixture Fertilizers - HELD THAT:- The product, “Nitrogenous Mixture Fertilizers” manufactured and supplied by the applicant consisting of Ammonium Sulphate and Urea mixed with Gypsum, Bentonite, Amino Acids and Bio-fulvic Potassium Humate and, hence, are classifiable under Tariff Item No.31029090- Other, of the First Schedule to the Customs Tariff Act, 1975(51 of 1975). If said products are clearly used as fertilizers, it will be covered under Entry at Sl. No.182A of Schedule-I of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 of the CGST Act, 2017 on which total rate of GST chargeable will be 5%. Mixture of Fertilizer - fall under the Sub-heading 31059090 as claimed by the applicant or otherwise - HELD THAT:- The product, ‘Mixture of Fertilizers’ manufactured and supplied by the applicant consisting of Nitrogen, Phosphorus, Potassium and Organic Content in the form of Urea, DAP, MOP, Gypsum, Rock Phosphate, Ammonium Sulphate, Bentonite, Dolomite, Amino Acids, Bio-Fulvic, Potassium Humate, Poultry and Organic Ash. Hence, the said product merits classification under Tariff Item No. 31059090-Other, of the First Schedule to the Customs Tariff Act, 1975(51 of 1975). If said products are clearly used as fertilizers, it will be covered under Entry at Sl. No.182D of Schedule-I of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 of the CGST Act, 2017 on which total rate of GST chargeable will be 5%. Issues Involved1. Classification of 'Organic Manure'2. Classification of 'Bio-fertilizers'3. Classification of 'Nitrogenous Mixture Fertilizers'4. Classification of 'Mixture Fertilizers'Detailed Analysis1. Classification of 'Organic Manure'Facts and Composition: The applicant manufactures 'Organic Manure' using ingredients such as Poultry Manure, Organic Ash, Compost, Cow Dung, Bone Meal, Sulphur Powder, Rock Phosphate, Bentonite, Gypsum, Bio-Culture Amino Acid, Bio-Fulvic, and Potassium Humate. The applicant proposed classification under Chapter 3101.Legal Interpretation: Chapter 3101 covers animal or vegetable fertilizers, whether mixed or chemically treated. However, ingredients like Sulphur Powder, Rock Phosphate, Bentonite, Gypsum, Potassium Humate, and Bio-Fulvic are not animal or vegetable products but minerals or chemically synthesized elements.Ruling: The product does not qualify under Chapter 3101 due to the presence of non-animal/vegetable ingredients. It is classified under Chapter 3105 as it contains nitrogen, phosphorus, and potassium. If used as fertilizers, it falls under Tariff Item No. 31059090 and is taxable at 5% GST (2.5% SGST + 2.5% CGST) per Sl. No. 182D of Schedule I of Notification No.1/2017-Central Tax (Rate).2. Classification of 'Bio-fertilizers'Facts and Composition: Bio-fertilizers consist of living microorganisms like Rhizobium, Azotobacter, Phosphate solubilizing bacteria, and others. The applicant initially classified them under Chapter 3101.Legal Interpretation: Bio-fertilizers, defined as substances containing living microorganisms that promote plant growth by increasing nutrient availability, do not fall under Chapter 3101. Instead, they are better classified under Chapter 3002, which includes cultures of microorganisms.Ruling: Bio-fertilizers are classified under Tariff Item No. 30029030 and taxable at 12% GST (6% SGST + 6% CGST) per Sl. No. 61 of Schedule-II of Notification No.1/2017-Central Tax (Rate).3. Classification of 'Nitrogenous Mixture Fertilizers'Facts and Composition: The product is a mixture of Ammonium Sulphate, Urea, Gypsum, Bentonite, Amino Acids, and Bio-fulvic Potassium Humate. The applicant proposed classification under HSN Code 31029090.Legal Interpretation: Chapter 3102 applies to mineral or chemical nitrogenous fertilizers. The composition aligns with the criteria of Chapter 3102, which includes mixtures of ammonium sulphate and urea with other substances.Ruling: Nitrogenous Mixture Fertilizers are classifiable under Tariff Item No. 31029090 and taxable at 5% GST (2.5% SGST + 2.5% CGST) per Sl. No. 182A of Schedule I of Notification No.1/2017-Central Tax (Rate).4. Classification of 'Mixture Fertilizers'Facts and Composition: The product includes Urea, DAP, MOP, Gypsum, Rock Phosphate, Ammonium Sulphate, Bentonite, Dolomite, Amino Acids, Bio-Fulvic, Potassium Humate, Poultry and Organic Ash. The applicant proposed classification under HSN 31059090.Legal Interpretation: Chapter 3105 covers mineral or chemical fertilizers containing two or three fertilizing elements (nitrogen, phosphorus, potassium) and other fertilizers. The product composition fits this category.Ruling: Mixture Fertilizers are classifiable under Tariff Item No. 31059090 and taxable at 5% GST (2.5% SGST + 2.5% CGST) per Sl. No. 182D of Schedule I of Notification No.1/2017-Central Tax (Rate).Summary of Rulings1. Organic Manure: Classified under Chapter sub-heading No. 31059090, taxable at 5% GST.2. Bio-fertilizers: Classified under Chapter sub-heading No. 30029030, taxable at 12% GST.3. Nitrogenous Mixture Fertilizers: Classified under Chapter sub-heading No. 31029090, taxable at 5% GST.4. Mixture Fertilizers: Classified under Chapter sub-heading No. 31059090, taxable at 5% GST.