Hydrated lime with less than 98% calcium content classified under HSN 2522 20 00 attracting 5% GST

The AAR Rajasthan ruled on GST classification for hydrated/slaked lime with less than 98% calcium oxide/hydroxide content. The authority determined that such lime products fall under HSN 2522 20 00, attracting 2.5% CGST and 2.5% SGST (total 5% GST). This classification was based on laboratory analysis showing impurities and calcium composition below 98%, supported by departmental clarification letters. The ruling provides certainty for lime manufacturers regarding tax liability on products not meeting high purity standards.

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Issues Involved:
1. Classification of slaked/hydrated lime containing less than 98% of calcium oxide and calcium hydroxide.
2. Applicable rate of tax under GST for the said product.

Issue-wise Detailed Analysis:

1. Classification of Slaked/Hydrated Lime:
The primary issue is the classification of slaked/hydrated lime manufactured by the applicant with calcium oxide and calcium hydroxide content less than 98%. The applicant seeks to determine the appropriate Harmonized System of Nomenclature (HSN) code for the product under the GST regime.

The applicant argues that the product should be classified under Chapter 2522 of the Customs Tariff, which covers "Quicklime, slaked lime and hydraulic lime, other than calcium oxide and hydroxide of heading 2825." This classification is based on the HSN Explanatory Notes, which specify that Chapter 2825 covers calcium oxide and hydroxide only in their pure states (approximately 98% purity). Since the applicant's product contains impurities and does not meet the 98% purity threshold, it is not covered under Chapter 2825.

The applicant supports this classification with judicial precedents, including the cases of "Commissioner of C. Ex., Hyderabad-I vs. BhadraDri Minerals Pvt. Ltd." and "M/s. Jindal Stainless (Hisar) Ltd vs. The Commissioner of Customs," which held that products with less than 98% purity fall under Chapter 25. Additionally, the applicant refers to clarifications issued by the Rajasthan State Tax department and the Office of the Assistant Commissioner, Division-C, Jodhpur CGST, which align with this interpretation.

The Authority for Advance Ruling (AAR) concurs with the applicant's interpretation, noting that the laboratory analysis reports confirm the presence of impurities and a calcium hydroxide content of less than 98%. Therefore, the AAR concludes that the product is classifiable under CTH 2522 20 00.

2. Applicable Rate of Tax:
The second issue concerns the applicable GST rate for the classified product. The applicant contends that the rate of tax should be 5% (2.5% CGST and 2.5% SGST) as per entry Sl. No. 131 of Schedule I of Notification No. 1/2017-C.T. (Rate), dated 28-6-2017.

The AAR agrees with this assessment, noting that the classified product falls under the specified entry, which prescribes a tax rate of 5%. The AAR's ruling is consistent with the applicant's understanding and aligns with the GST notification's provisions.

Ruling:
1. Classification and HSN Code: The slaked/hydrated lime manufactured by the applicant, containing less than approximately 98% of calcium oxide/hydroxide, is classifiable under CTH 2522 20 00.
2. Rate of Tax: The applicable rate of tax for the product is 2.5% CGST and 2.5% SGST, totaling 5%, as per entry Sl. No. 131 of Schedule I of Notification No. 1/2017-C.T. (Rate), dated 28-6-2017.

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