Advance ruling application rejected for guar gum slurry due to insufficient chemical composition reports from certified laboratories

The AAR Rajasthan rejected an application for advance ruling regarding classification and tax rate of guar gum slurry suspended in mineral oil. The applicant failed to submit proper chemical composition reports from certified laboratories despite requests during proceedings. Without detailed composition analysis, the authority could not determine whether the product falls under Chapter 13 or constitutes a new product through mixing processes. The application was deemed non-maintainable under GST Act provisions due to insufficient technical documentation required for HSN classification.

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Issues Involved:
1. Classification of the liquid suspension of guar gum powder (suspended in mineral oil) under GST.
2. Applicable tax rate on the supply of the said product.

Summary:

Issue 1: Classification of the Liquid Suspension of Guar Gum Powder (Guar Gum Slurry)

The applicant, M/s Supreme Gums Private Ltd., proposes to manufacture a liquid suspension of guar gum powder suspended in mineral oil, known as guar gum slurry, primarily used in the oil and gas industry for hydraulic fracturing. The applicant contends that since the product contains more than 50% mineral oil, it should be classified under Chapter 27 of the Customs Tariff Act, 1975, which pertains to mineral fuels, mineral oils, and products of their distillation.

The jurisdictional officer, however, suggests that the processed material 'Guar Gum Slurry' should fall under Chapter 13 of the First Schedule to the Customs Tariff Act, 1975, which includes gums, resins, and other vegetable saps and extracts. The officer argues that the product undergoes chemical treatment to improve its properties, thus changing its character and identity.

The authority, upon review, notes that Chapter 27 is specific to mineral fuels and oils and does not cover the guar gum slurry as claimed by the applicant. Furthermore, without a proper composition report from a certified laboratory, it is challenging to ascertain the correct classification. The authority also considers Chapter 34, which pertains to lubricating preparations, but the lack of detailed composition prevents a definitive classification.

Issue 2: Applicable Tax Rate on the Supply of Guar Gum Slurry

Due to the unresolved classification issue, the applicable tax rate on the supply of guar gum slurry remains undetermined. The authority emphasizes the necessity of a certified chemical composition report to accurately classify the product and determine the appropriate GST rate.

Ruling:

The application for advance ruling is rejected under the provisions of the GST Act, 2017, due to the lack of sufficient information regarding the chemical composition and nature of the product.

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