Appellate Authority Confirms GST Rate for Bio Fertilizers

The appellate authority upheld the classification of bio fertilizers RhizoMyx and RhizoMyco under Tariff item No. 30029030 of the Customs Tariff Act, 1975, as "cultures of micro-organisms (excluding yeasts)" under Heading 3002. The Goods and Services Tax (GST) rate of 12% was confirmed for these products. Despite a delay in filing the appeal, which was condoned due to COVID-19 disruptions, the appellant's challenge was rejected, affirming the original rulings on classification and tax rate.

---

---

Issues Involved:
1. Classification of bio fertilizers RhizoMyx and RhizoMyco.
2. Applicable rate of Goods and Services Tax (GST) on RhizoMyx and RhizoMyco.
3. Delay in filing the appeal and its condonation.

Detailed Analysis:

1. Classification of Bio Fertilizers RhizoMyx and RhizoMyco:

The appellant, engaged in the supply of bio fertilizers in Gujarat, sought an advance ruling on whether RhizoMyx and RhizoMyco should be classified under Chapter 3101 or Chapter 3002 of the Customs Tariff Act, 1975. The Advance Ruling Authority (AAR) classified the products under Heading 3002, which pertains to "cultures of micro-organisms (excluding yeasts)."

The appellant argued that their products should fall under Chapter 3101, which includes animal or vegetable fertilizers. They contended that the inert materials in their products, like humic acid, are manures, and thus, the products should be classified under Chapter 3101. They also referenced a similar ruling by the Rajasthan AAR and a Supreme Court decision in the case of Northern Minerals Ltd., which classified a plant growth promoter under Heading 3101.

However, the appellate authority noted that biofertilizers are defined as substances containing living microorganisms that promote plant growth by increasing nutrient availability. The authority compared the definitions and uses of biofertilizers, animal fertilizers, and organic fertilizers, concluding that biofertilizers are distinct from the latter and do not fall under Subheading 3101.

The authority further examined Heading 3002, which includes "cultures of micro-organisms (excluding yeasts)" and noted that biofertilizers produced by culturing microorganisms fit this description. The explanatory notes to HSN for Heading 3002 include cultures of microorganisms for technical purposes, such as aiding plant growth, which aligns with the characteristics and uses of RhizoMyx and RhizoMyco.

Thus, the appellate authority upheld the AAR's classification of RhizoMyx and RhizoMyco under Tariff item No. 30029030 of the Customs Tariff Act, 1975.

2. Applicable Rate of Goods and Services Tax (GST) on RhizoMyx and RhizoMyco:

The AAR ruled that RhizoMyx and RhizoMyco are liable to GST at 12% (6% SGST + 6% CGST) as they fall under Heading 3002. The appellant challenged this, arguing that their products should be taxed at 5% under Chapter 3101.

The appellate authority referred to Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017, which lists the GST rates for various goods. Entry No. 61 of Schedule-II of the notification covers "cultures of microorganisms (excluding yeasts)" under Heading 3002, attracting a GST rate of 12%. Since RhizoMyx and RhizoMyco are classified under this heading, the appellate authority confirmed the applicable GST rate of 12%.

3. Delay in Filing the Appeal and Its Condonation:

The appellant filed the appeal on 10.09.2020, beyond the 30-day period from the receipt of the AAR order on 14.07.2020. The appellant cited COVID-19 related disruptions and reliance on CBIC notifications extending the time limit for filing appeals due to the pandemic.

The appellate authority acknowledged the delay but condoned it, considering the exceptional circumstances and the fact that the delay was unintentional. The authority referenced the Apex Court's decisions, which emphasize that appeals in high-stake matters should not be dismissed solely on the grounds of delay.

Conclusion:

The appellate authority confirmed the AAR's ruling that RhizoMyx and RhizoMyco are classifiable under Tariff item No. 30029030 of the Customs Tariff Act, 1975, and are liable to GST at 12%. The appeal filed by the appellant was rejected.

---