Sale of Paper Sludge

[Manjunath S]

Dear Sir,

We are paper manufacturers and we wanted to know that the paper sludge waste is taxable or excempt under GST ?

If taxable, what is the rate of Tax ?

Please explain in details.

Thanks in advance.

Regards,

Manjunath S

[KASTURI SETHI]

In my view, it is not taxable in the GST regime. In pre-GST era, paper sludge was non-excisable goods and Board treated as exempted goods for the purpose of reversal of Cenvat Credit under Rule 6(3) of the Credit Rules, 2004.The following case laws, Board's circular, notification can help you strongly in arriving at concrete decision in the GST regime.

2014 (303) E.L.T. 226 (Tri. - Del.) = 2014 (4) TMI 416 - CESTAT NEW DELHI MAGNUM VENTURES Versus COMMISSIONER OF CENTRAL EXCISE, GHAZIABAD

Circular No. 1027/15/2016-CX, dated 25-4-2016

2015 (315) E.L.T. 444 (Tri. - Ahmd.) = 2013 (12) TMI 1507 - CESTAT AHMEDABAD J.K. PAPER LTD. Versus COMMISSIONER OF CENTRAL EXCISE, SURAT-I

[Manjunath S]

Dear Sir,

Thanks for your immediate reply.

Whether Paper sludge fall in Exempted goods, or Zero rated, Please provide notification if any.

If Paper sludge is not taxable, then is it require to reverse ITC under rule 43.

Kindly guide.

[KASTURI SETHI]

Chapter/Heading,namely, “198B 4707 Recovered waste or scrap of paper or paperboard”; has been inserted vide Notification No.34/17-CT(Rate) dated 13.10.17 attracting tax in the slab of 5%. But the above judgements pertaining to pre-GST era have held that Paper Sludge does not fall under Chapter/Heading No. 4707 90 00. Hence in my view it is non taxable. Exempt supply also includes non-taxable supply.

As per Section 2(47) of CGST ACT (47) “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;

Reversal is required under Rule 42 and 43 of CGST Rules.

If you have any doubt, you can approach Advance Ruling Authority relying upon the above case laws and Board's circular. Classification of any product is rarely changed by the department as it is based on HSN which has international basis.

[YAGAY andSUN]

In our view it is taxable in GST regime as there is no concept enshrined. Further, paper sludge is supplied to card board manufacturer against consideration.

[Apurba Biswas]

Supply against price is chargeable to GST @5%.

[KASTURI SETHI]

Taxable @ 5% only if it is classifiable under Chapter/Heading/Sub-heading No.4707.90.00 Anyhow, difference of opinion always leads to healthy result whether in favour of assessee or not.

AI Summary

Taxability of paper sludge hinges on its classification under the recovered waste heading; seek an advance ruling to resolve treatment. Whether sale of paper sludge attracts GST depends on its classification under the recovered waste heading; if classifiable under that heading it is taxable at the notified concessional rate, but if not classifiable it is non taxable and falls within the concept of exempt supply. Classification uncertainty also affects reversal obligations for input tax credit, and seekers are advised to obtain an advance ruling to determine applicable treatment.