Plastic Rooter Trainer Cups for plant propagation classified under CTH 3926 90 99, attracting 18% GST rate

The AAR-Kerala classified plastic Rooter Trainer Cups used for plant propagation under CTH 3926 90 99 rather than HSN 8201 90 00. The Authority determined that since the product is made of plastic, it falls under Chapter 39 of the Customs Tariff covering "Plastics and Articles thereof." As no specific sub-heading existed for agricultural plastic products, it was classified under the residual heading 3926 90 99. The GST rate applicable is 18% (9% CGST + 9% SGST) under Schedule III, Sl. 111 of Notification No. 1/2017-Central Tax (Rate). The exemption for agricultural implements under Chapter 8201 was not applicable as the product neither qualified under that chapter nor met the manually operated or animal-driven criteria.

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The core legal questions considered in this advance ruling application pertain primarily to the classification and applicable GST rate of a plastic product known as the "Rooter Trainer Cup," which is used exclusively for the propagation of rubber plants-an agricultural activity. Specifically, the issues were:

1. Whether the Rooter Trainer Cup qualifies as an agricultural implement under the GST law.

2. The correct classification of the Rooter Trainer Cup under the Harmonized System of Nomenclature (HSN) code and Customs Tariff Heading (CTH).

3. The applicable GST rate on the Rooter Trainer Cup, considering its classification and usage.

Issue-wise Detailed Analysis

Issue 1: Qualification of the Rooter Trainer Cup as an Agricultural Implement

The applicant contended that the Rooter Trainer Cup is an agricultural implement used exclusively for the propagation of rubber plants, which is an agricultural activity. This contention was supported by a certificate from the Rubber Research Institute of India, Rubber Board, which officially recommended the Rooter Trainer Cup for rubber cultivation and detailed its agricultural use and specifications.

The Court noted that the product is manually operated and used exclusively by farmers for agricultural purposes, which aligns with the definition of agricultural implements. The Rubber Board's certification and the product's exclusive use in agriculture were key evidentiary supports.

However, the Court also considered whether the product's material composition (plastic) affected its classification as an agricultural implement under the GST framework, which led to further analysis under the tariff classification issue.

Issue 2: Correct Classification under HSN and Customs Tariff Heading

The applicant proposed classification under HSN 8201 90 00, which covers "other hand tools of a kind used in agriculture, horticulture or forestry." This heading falls under Chapter 82 of the Customs Tariff, which pertains to tools and implements made of base metal.

The Court rejected this classification because the Rooter Trainer Cup is made entirely of plastic, not metal. Chapter 82's scope is limited to articles of base metal, making the applicant's suggestion inapplicable.

The Court then examined Chapter 39 of the Customs Tariff, which covers "Plastics and Articles thereof." Since the Rooter Trainer Cup is made of reusable plastic and does not fall under any specific subheadings of Chapters 3901 to 3925, the product was classified under the residual heading 3926, specifically 3926 90 99, which covers "Other articles of plastics."

This classification was supported by precedents from the Authority for Advance Rulings (AAR), Tamil Nadu, which had ruled similarly on plastic agricultural products such as seedling trays, holding them under CTH 3926 90 99 with a 9% CGST rate applicable. These precedents were upheld by the Appellate Authority for Advance Ruling (AAAR), reinforcing the classification.

Issue 3: Applicable GST Rate

Once classified under HSN 3926 90 99, the Court examined the applicable GST rate. The applicant sought exemption or concessional rates applicable to agricultural implements under Chapter 82, which attract exemption under Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017. However, since the product is not classifiable under Chapter 82, the exemption was inapplicable.

The Court referred to Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and its subsequent amendments, which impose a 9% CGST and 9% SGST rate on "Other articles of plastics" under Sl. No. 111 of Schedule III. The Court noted that earlier entries covering similar items at 14% were omitted and replaced by the current 9% rate for such plastic articles.

Therefore, the Rooter Trainer Cup attracts an 18% GST rate (9% CGST + 9% SGST) as per the amended notification.

Treatment of Competing Arguments

The applicant's reliance on the classification under Chapter 82 was carefully examined and rejected due to the product's plastic composition. The Court gave significant weight to the Rubber Board's certification and the product's exclusive agricultural use but emphasized that classification under GST is primarily determined by tariff headings and material composition.

Precedents from other AARs and AAARs were considered authoritative, and the Court aligned its ruling accordingly, thereby rejecting the applicant's request for exemption under agricultural implements and confirming the residual classification under plastics.

Conclusions

The Rooter Trainer Cup, though used exclusively for agricultural propagation, cannot be classified as an agricultural implement under Chapter 82 due to its plastic composition. Instead, it falls under Chapter 39, specifically under HSN 3926 90 99 as "Other articles of plastics." The applicable GST rate is 9% CGST and 9% SGST, totaling 18%.

Significant Holdings

The Court held: "Since the item under consideration is made of plastic, it does not fall within the scope of Chapter 82, which is limited to articles of base metal. Therefore, the applicant's suggestion that the item should be classified under heading 8201 90 00 cannot be accepted."

Further, the Court stated: "The product in question, namely the 'Rooter Trainer Cup' made of plastic, is appropriately classifiable under Customs Tariff Heading 3926 90 99, which shall be the applicable classification for the purposes of levy of GST."

On the rate of tax, the Court ruled: "The product is classifiable under HSN 3926 90 99 with the description 'Other articles of plastic' and is taxable at 9% under Sl. No. 111 of Schedule III of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 (as amended), and at 9% under the corresponding SGST notification, making the effective GST rate 18%."

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