Fly ash bricks classed under HSN 6815 99 10; taxable at 12% from 18.07.2022, no 6% concession

AAR held that fly ash bricks are classifiable under HSN 6815 99 10 and, from 18.07.2022, attract GST at 12% irrespective of fly ash content (no 6% concession). Bricks are not exempt, supplies are taxable under the normal scheme (not reverse charge), and no special reduced rate applies when sold to Government/PSUs. A manufacturer may avail ITC if charging 12% (opting for concessional 6% would bar ITC as per conditions). Manufacturers of fly ash bricks are ineligible for the composition scheme. Issue on GST on fly ash as raw material was held outside AAR's purview.

---

---

ISSUES PRESENTED AND CONSIDERED

1. Whether Fly Ash Bricks (made with more than 51% fly ash) are classifiable under HSN code 6815 99 10 and what GST liability attaches to that classification.

2. What GST rate applies to Fly Ash Bricks containing more than 51% fly ash and whether the rate differs by percentage of fly ash content (specifically 51% v. >51%).

3. Whether Fly Ash Bricks containing more than 51% fly ash are eligible for exemption or reduced GST rates on account of use of recycled/sustainable material (fly ash).

4. Whether a manufacturer of such Fly Ash Bricks may claim Input Tax Credit (ITC) on purchases of raw materials used in manufacture.

5. Whether sale of such Fly Ash Bricks for construction (residential/commercial) is taxable under normal forward charge or under reverse charge mechanism.

6. Whether Fly Ash Bricks with >51% fly ash qualify for special exemption or reduced GST rate when supplied to Government/PSUs for public infrastructure projects.

7. Whether a manufacturer of Fly Ash Bricks with >51% fly ash is eligible to opt for the GST composition scheme and the implications thereof.

8. Whether GST rate/treatment on fly ash as a raw material differs when fly ash constitutes more than 51% of the finished product (and whether that question falls within the Authority's jurisdiction).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Classification (HSN) and applicable taxable provision

Legal framework: Tax leviable on intra-State supplies under the GST charging provision; goods are classifiable according to the HSN and schedules to the rate Notification made under the taxing provision.

Precedent treatment: Applicant relied on a High Court order favorable to a litigant in another State; the Authority considered that material but applied the statutory Notifications and schedules applicable nationally.

Interpretation and reasoning: Fly Ash Bricks are listed in the Schedule to the rate Notification and, since amendment effective from 18.07.2022, the entry for fly ash bricks is under heading 6815. The Authority therefore determined the specific subheading/HSN applicable to the applicant's product.

Ratio vs. Obiter: Ratio - classification is governed by the Notification and entries in Schedule II; the Authority's identification of HSN 6815 99 10 for Fly Ash Bricks is operative.

Conclusion: Fly Ash Bricks are classifiable under HSN 6815 99 10 and taxable as per the Schedule entry in the rate Notification applicable to fly ash bricks.

Issue 2 - Applicable GST rate and effect of fly ash content percentage

Legal framework: Rate Notification (as amended) prescribes rates for listed goods; a separate concessional scheme (Notification permitting lower rate subject to forfeiture of ITC) is available under specified conditions.

Precedent treatment: The Authority noted the applicant's reliance on external judicial pronouncements but applied the controlling Notifications as amended.

Interpretation and reasoning: With effect from 18.07.2022 the condition regarding specific fly ash content was omitted and the Schedule entry now covers fly ash bricks generally. As amended, the standard rate applicable to fly ash bricks is 12% (CGST 6% + SGST 6%). Separately, a concessional route allows intra-state suppliers to pay overall 6% (CGST 3% + SGST 3%) provided the supplier does not take ITC and complies with prescribed reversal/conditions.

Ratio vs. Obiter: Ratio - rate is 12% where ITC is availed; supplier may elect the concessional 6% only if conditions (no ITC and requisite reversals) are complied with. The omission of content-based condition is dispositive.

Conclusion: No difference in rate based on whether fly ash content is exactly 51% or more; standard GST rate is 12% with ITC, or 6% without ITC if the conditions of the concessional notification are satisfied. Where applicant avails ITC, the concessional route is not available.

Issue 3 - Exemption or reduced rate by reason of recycled/sustainable material

Legal framework: Exemptions are by notification issued under the exemption power; goods not listed in the exempted goods Notification are not nil-rated/exempt.

Precedent treatment: None applied to alter statutory Notification lists.

Interpretation and reasoning: Fly Ash Bricks do not appear in the Notification list of exempted goods; there is no general exemption for goods merely because they incorporate recycled or sustainable inputs unless specifically notified.

Ratio vs. Obiter: Ratio - non-eligibility for exemption follows from the absence of fly ash bricks in the exempted goods Notification.

Conclusion: Fly Ash Bricks containing >51% fly ash are not eligible for exemption or reduced rate on account of using recycled/sustainable material; they attract GST as per the applicable rate Notification.

Issue 4 - Entitlement to Input Tax Credit (ITC)

Legal framework: ITC is available subject to the general ITC provisions; Notification prescribing concessional rate disallows ITC where chosen.

Precedent treatment: Applicant's practice of availing ITC was accepted as factual background for determining eligibility for concessional rate.

Interpretation and reasoning: If the manufacturer pays tax at the standard rate (12%), ITC on inputs and input services may be claimed if otherwise eligible under the ITC provisions. If the manufacturer elects the concessional scheme (overall 6%), ITC cannot be availed and reversal/conditions must be complied with.

Ratio vs. Obiter: Ratio - entitlement to ITC depends on the chosen tax route: available under the standard-rate route; barred under the concessional route per the Notification.

Conclusion: Manufacturer may claim ITC when paying GST at 12% and meeting ITC eligibility; if opting for concessional 6%, ITC cannot be claimed and prescribed conditions apply.

Issue 5 - Applicability of reverse charge

Legal framework: Reverse charge applies only where supplies or categories are specifically notified under the reverse charge provisions.

Interpretation and reasoning: Fly Ash Bricks are included in the rate Notification under the normal charging provision (forward charge) and are not part of the activities/goods notified for reverse charge under the applicable sections.

Ratio vs. Obiter: Ratio - sale of Fly Ash Bricks by the applicant is subject to the normal forward charge and not reverse charge.

Conclusion: Sales of Fly Ash Bricks for construction by the applicant are taxable under the normal taxation (forward charge); reverse charge does not apply.

Issue 6 - Special concessions when sold to Government/PSUs

Legal framework: Exemptions or reduced rates are governed by the exempting Notification and apply irrespective of recipient unless the Notification specifies recipient-based concession.

Interpretation and reasoning: The exempted goods Notification does not single out fly ash bricks for exemption when supplied to government or PSUs; exemptions are supply-based and not recipient-based absent specific Notification language.

Ratio vs. Obiter: Ratio - no special exemption or reduced rate arises merely because the purchaser is a Government/PSU.

Conclusion: No special GST exemption or reduced rate for Fly Ash Bricks sold to Government/PSUs for public infrastructure projects.

Issue 7 - Eligibility for Composition Scheme

Legal framework: Composition eligibility is governed by the composition Notifications which list categories/manufacturers excluded from opting into composition levy.

Interpretation and reasoning: Notifications were amended to expressly exclude manufacturers of fly ash bricks/aggregates/blocks from composition eligibility. The amendment substituting a broader entry (effective from 18.07.2022) removes earlier percentage-based carve-outs and bars manufacturers of fly ash bricks generally from composition.

Ratio vs. Obiter: Ratio - manufacturers of fly ash bricks are ineligible for composition levy under the composition Notifications.

Conclusion: The applicant, being a manufacturer of fly ash bricks, is not eligible to opt for the GST composition scheme irrespective of turnover.

Issue 8 - Taxation/classification of fly ash as a raw material and jurisdictional competence

Legal framework: Advance Ruling jurisdiction is confined to supplies undertaken by the applicant; classification or taxability of third-party supplied raw material is outside scope where ruling would address supplies by others.

Interpretation and reasoning: The Authority held that an advance ruling cannot be given in respect of the classification/taxability of fly ash as a raw material received from third parties, since the Applicant's question pertains to supply by another person and not the Applicant's own supply.

Ratio vs. Obiter: Ratio - the question on GST rate of fly ash as raw material is out of the Authority's purview under the Advance Ruling provisions.

Conclusion: No ruling is pronounced on the GST rate or classification of fly ash as a raw material; that question is outside the scope of the Advance Ruling sought.

---