GST Circular and Clarifications on Revised Rates for Various Items

GST

12.10.2021: The Central Board of Indirect & Customs issued a circular to clarify the GST rate on Fresh and Dried Fruits, Tamarind, Copra, Solar Power, etc. This has reference to Circular No. 163/19/2021-GST Dt.06.10.2021. Read to know whether there is a need for an Original essentiality certificate, issued by the Directorate General of Hydrocarbons on each inter-State stock transfer of goods. Let us understand the entire concept one by one.

GST Rate on Fresh and Dried Fruits

At present, fresh nuts (almond, walnut, hazelnut, pistachio, etc) are falling under heading 0801 and 0802 are exempt from GST. Whereas dried nuts under these headings and attract GST at the rate of 5%/ 12%. The general Explanatory Notes to chapter 08 mentions that this chapter covers fruit, nuts intended for human consumption. Thus, they may be fresh (including chilled), frozen (whether or not previously cooked by steaming or boiling in water or containing added sweetening matter), or dried (including dehydrated, evaporated, or freeze-dried).

gst rate on fruits

Thus, the HS chapter differentiates between fresh, frozen, and dried fruits and nuts. Fresh fruit and nuts would thus cover fruit and nuts which are meant to be supplied in the state as plucked. Hence, they continue to be fresh even if chilled. However, fruit and nuts do not qualify as fresh, once frozen (cooked or otherwise), or intentionally dried to dehydrate including through sun drying, evaporation, or freezing, for supply as dried fruits or nuts.

Hence, It is to note that in terms of note 3 to Chapter 8, dried fruits, even if partially re-hydrated, or subject to preservation say by moderate heat treatment, retain the character of dried fruits or dried nuts.

Therefore, exemption from GST to fresh fruits and nuts covers only such products which are not frozen or dried in any manner as stated above or otherwise processed. Thus, the supply of dried fruits and nuts, falling under heading 0801 and 0802 attract GST at the rate of 5%/12% as specified in the respective rate Schedules.

Tamarind Seeds

The clarification is issued due to the dispute in the classification of tamarind seeds between tariff heading 1207 and 1209.

According to the general Explanatory Notes to HS 2017, heading 1209, covering seeds, fruit, and spores, of a kind used for sowing, covers tamarind seeds.

As per Chapter note 3 to Chapter 12, for the purposes of heading 1209 the followings seeds are to be regarded as “seeds of a kind used for sowing”.

  • beet seeds
  • grass and other herbage seeds
  • seeds of ornamental flowers
  • vegetable seeds
  • Forest trees seeds
  • seeds of fruit trees
  • seeds of vetches (other than those of the species Vicia faba) or of lupines

Thus, tamarind seeds, even if used for any purpose other than sowing, are liable to be classified under heading 1209 and hitherto attracted nil GST rate, irrespective of its use (for the period 01.07.2017 to 30.09.2021).

Further, the GST council in its 45th meeting decided to levy the GST rate on seeds, falling under heading 1209, meant for any use other than sowing to 5% (S. No. 71A of schedule I of notification No. 1/2017- Central Tax (Rate) dated 28.06.2017). Also, the Nil rate would apply only to seeds for this heading if used for sowing purposes (S. No. 86 of schedule of notification No. 2/2017- Central Tax (Rate) dated 28.06.2017).

Hence, with effect from 1.10.2021, tamarind and other seeds falling under heading 1209, (i.e. including tamarind seeds), if not supplied as seed for sowing, would attract GST at the rate of 5%.

Copra and GST Applicability

According to the explanatory Notes to HS (2017 edition) to heading 1203, Copra is the dried flesh of coconut generally used for the extraction of coconut oil. Thus, the Coconut kernel turns into copra, when it separates from the shell skin, while still being inside the shell. Hence, the whole unbroken kernel could be taken out of the shell only when it converts to copra. Thus, once taken out of the shell, copra could be supplied either whole or broken.

Further, as per the Explanatory Notes to HS, heading 0801 covers coconut fresh or dried but excludes Copra. Thus, the exemption available to Coconut, fresh or dried, whether or not shelled or peeled, vide entry at S. No. 47 of notification No. 2/2017- Central Tax (Rate) dated 28.6.2017, is not available to Copra.

Accordingly, Copra, classified under heading 1203, attracts a GST rate of 5% vide entry at S. No. 66 of
Schedule I of 1/2017-Central Taxes (Rate) dated 28.06.2017, irrespective of use.

Pure Henna Powder and Leaves

According to explanatory Notes to HS 2017, heading 1404 is vegetable products not elsewhere specified or included. Further, as per the said Explanatory Notes, heading 1404 includes raw vegetable materials of a kind used primarily in dyeing or tanning.

Thus, such products are used primarily in dyeing or tanning either directly or in preparation of dyeing or tanning extracts. Hence, the material may be untreated, cleaned, dried, ground, or powdered (whether or not compressed).

Accordingly, CBIC clarifieS that pure henna powder and henna leaves, having no additives, is classifiable under tariff item 1404 90 90 and shall attract a GST rate of 5% (S.No. 78 of schedule I of notification No. 1/2017-Central Tax (Rate) dated 28.06.2017).

Similarly, the GST rate on mehndi paste in cones falling under heading 1404 and 3305 shall be 5% (S. No. 78A of schedule I of notification No. 1/2017-Central Tax (Rate) dated 28.06.2017).

Cented sweet supari & flavored and coated illaichi

gst rate on sweet supari

The scented sweet supari falls under tariff item 2106 90 30 as “Betel nut product” known as “Supari” and attracts a GST rate of 18% vide entry at S. No. 23 of Schedule III of notification No. 1/2017-Central Tax (Rate) dated 28.6.2017.

Further, the flavored and coated illaichi generally consists of Cardamom Seeds, Aromatic Spices, Silver Leaf, Saffron, Artificial Sweeteners. Thus, It is distinct from illaichi or cardamom (which falls under heading 0908). Therefore, it clarifies that flavored and coated illaichi is a value-added product and falls under sub-heading 2106.

On the basis of the above explanation, it attracts GST at the rate of 18% (S. No. 23 of schedule III of notification No. 1/2017-Central Tax (Rate) dated 28.06.2017).

Brewers’ Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues

The clarification is provided herewith regards to classification and applicable GST rates on Brewers’ spent grain (BSG), Dried distillers’ grains with soluble [DDGS]. Also, it includes other such residues of starch manufacture and similar residues, beet-pulp, bagasse and other waste of sugar manufacture, brewing or distilling dregs, and waste, whether or not in the form of pellets.

According to the explanatory notes to the HSN, heading 2303 includes:

  • Residues of starch manufacture and similar residues (from maize (corn)
  • Rice
  • Potatoes, etc.)
  • Beet-pulp
  • Bagasse
  • Other waste products of sugar manufacture
  • Brewing or distilling dregs and waste, which comprises in particular – dregs of cereals obtained in the manufacture of beer and consisting of exhausted grains remaining after the wort has been drawn off
  • Malts sprouts separated from the malted grain during the kilning process
  • Spent hops
  • Dregs resulting from the distillation of spirits from grain, seeds, potatoes, etc
  • Beet pulp wash (residues from the distillation of beet molasses).

All these products remain in the above-classified heading whether presented in wet or dry.

Therefore, Brewers’ spent grain (BSG), Dried distillers’ grains with soluble [DDGS] and other such residues are classifiable under heading 2303, attracting GST at the rate of 5% (S. No. 104 of Schedule I of notification No. 1/2017-Central Tax (Rate) dated 28.06.2017).

Pharmaceutical Goods falling under heading 3006

An entry at S. No. 65 of Schedule II of Notification No. 1/2017-Central Tax (Rate) dated 28.6.2017, reads as:

“Pharmaceutical goods specified in Note 4 to this Chapter [i.e. Sterile surgical catgut, similar sterile suture materials (including sterile absorbable surgical or dental yarns) and sterile tissue adhesives for surgical wound closure; sterile laminaria and sterile laminaria tents; sterile absorbable surgical or dental haemostatics; sterile surgical or dental adhesion barriers, whether or not absorbable; Waste pharmaceuticals] [other than contraceptives]”

Further, S. No. 65 of Second Schedule of Notification 1/2017- Central Tax (Rate) dated 28.6.2017 refers to note 4 to Chapter 30 of the First Schedule of the Customs Tariff Act, 1975 while mentioning an illustrative list. Certain representations were received seeking clarification on the applicable rate of goods falling under heading 3006 that is
not specifically mentioned in the Entry at S. No. 65 of Schedule II of Notification No. 1/2017-Central Tax (Rate) dated 28.6.2017.

gst on pharmaceutical goods

Note 4 to Chapter 30 of the First Schedule of the Customs Tariff Act, 1975 reads as follows:
“(a) sterile surgical catgut, similar sterile suture materials (including sterile absorbable surgical or dental yarns), and sterile tissue adhesives for surgical wound closure
(b) sterile laminaria and sterile laminaria tents
(c) sterile absorbable surgical or dental haemostatics sterile surgical or dental adhesion barriers, whether or not absorbable
(d) opacifying preparations for X-ray examinations and diagnostic reagents designed to be administered to the patient, being unmixed products put up in measured doses or products consisting of two or more ingredients that have been mixed together for such uses
(e) blood-grouping reagents
(f) dental cement and other dental fillings; bone reconstruction cement
(g) first-aid boxes and kits
(h) chemical contraceptive preparations based on hormones, on other products of heading 2937 or on spermicides;
(i) gel preparations designed to be used in human or veterinary medicine as a lubricant for parts of the body for surgical operations or physical examinations or as coupling the agent between the body and medical instruments; and
(j) waste pharmaceuticals, that is, pharmaceutical products that are unfit for their original intended purpose due to, for example, expiry of shelf-life.
(k) appliances identifiable for ostomy use, that is colostomy, ileostomy, and urostomy
pouches cut to shape and their adhesive wafers or faceplates.”

Thus, CBIC clarifies that said entry 65 covers all goods as specified in Chapter Note 4, and Chapter Note 4, in turn, covers all goods covered under Heading 3006. Therefore, said entry 65 covers all goods falling under heading 3006, irrespective of the fact that such goods are specifically mentioned in said entry. Therefore, all goods falling under heading 3006 attract GST rate of 12% under entry 65 in the 12% rate schedule.

All laboratory substances and other goods falling under heading 3822

An entry at S. No. 80 of Schedule II of Notification No.1/2017- Integrated Tax (Rate) dated 28.6.2017 prescribes a GST rate of 12% for “All diagnostic kits and reagents”. The clarification is provided to clarify that the benefit of concessional rate of 12% would be available to laboratory agents and other goods falling under heading 3822.

Heading 3822 covers “Diagnostic or Laboratory Reagents, Certified Reference Materials, etc.”. Thus, CBIC clarifies that the intention of this entry was to prescribe a GST rate of 12% to all goods, whether diagnostic or laboratory substances, falling under heading 3822.

Therefore, the concessional GST rate of 12% is applicable on all goods falling under heading 3822, vide Entry at S. No. 80 of Schedule II of Notification No.1/2017-Integrated Tax (Rate) dated 28.6.2017.

Requirement of Original/import Essentiality certificate

Clarification is issued to clarify that whether there is a requirement of Original/ import Essentiality certificate, issued by the Directorate General of Hydrocarbons (DGH) on each inter-State stock transfer of goods imported at concessional GST rate for petroleum operations.

Notification No. 3/2017-Central Tax (Rate) prescribes a concessional rate of 5% for specified goods that are used in connection with specified petroleum operations. Condition 1 (d) in notification No. 03/2017-Central Tax dated 28.06.2017 prescribes that “whenever goods so supplied are transferred to other licensee or sub-contractor a certificate from Directorate General of Hydrocarbons (DGH) is to be produced that the goods may be transferred to the transferee”.

Thus, as per Section 7 read with Schedule-I of the CGST Act 2017, inter-state stock transfer between distinct persons (establishment of the same person located in two different states) is considered as ‘supply ‘of goods. Also, the clarification was sought whether the original/ import Essentiality certificate can be used for such inter-state stock transfers or a fresh essentiality certificate would be required for each inter-state stock transfer as it is being treated as supply subject to IGST.

The GST Council did a study on this issue and a decision was taken that the original/ import Essentiality certificate, issued by the Directorate General of Hydrocarbons (DGH) is sufficient and there is no need for taking a certificate every time on inter-state movement of goods within the same company/stock transfer so long as the goods are the same as those imported by the company at a concessional rate.

However, the importer is required to maintain records and should be able to establish nexus between the stock transfer of goods and the description in the essentiality certificate.

External batteries sold along with UPS Systems/Inverter

The circular hereby clarifies that whether ‘UPS Systems/inverters sold along with batteries as integral parts’ are classified under the heading 8507 at 28% GST or under heading 8504 at 18% GST.

Thus, the matter has been examined by the Government and it is observed that even if the UPS/inverter and external battery are sold on the same invoice, their price is separately known, and they are two separately identifiable items.

Thus, this constitutes a supply of two distinctly identifiable items on one invoice. Therefore, it is clarified that in such supplies, UPS/inverter would attract a GST rate of 18% under heading 8504, while external batteries would attract the GST rate as applicable to it under heading 8507 (28% for all batteries except for lithium-ion battery).

GST rates on Solar PV Power Projects

The CBIC clarifies the GST rates applicable on Solar PV Power Projects on or before 1st January 2019. The issue seems to have arisen in the context of Notification No.24/2018- Central Tax (Rate), dated 31st December 2018.

Thus, an explanation was inserted vide the said notification that GST on specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for goods and services, respectively, with effect from 1st January 2019. The request has been that the same ratio (for deemed value) may be applied in respect of supplies made before 1.1.2019.

As per this explanation, if the goods specified in this entry are supplied, by a supplier, along with supplies of other goods and services, one of which being a taxable service specified in the entry at S. No. 38 of the Table mentioned in the notification No. 11/2017-Central Tax (Rate), dated 28th June 2017, the value of supply of goods for the purposes of this entry shall be deemed as seventy percent. of the gross consideration charged for all such supplies, and the remaining thirty percent. of the gross consideration charged shall be deemed as value of the said taxable service.

This mechanism for valuation of supply was recommended by the Council considering that it adequately represented the value of goods and services involved in the supply.

solar power projects gst rate

The GST Council has decided to clarify that GST on such specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for goods and services, respectively, for the period of 1st July 2017 to 31st December 2018, in the same manner as has been prescribed for the period on or after 1st January 2019, as per the explanation in Notification No.24/2018 dated 31st December 2018.

However, it is specified that no refunds will be granted if GST already paid is more than the amount determined using this mechanism.

Fibre Drums, whether corrugated or non- corrugated

Till now corrugated boxes and cartons, falling under heading 4819 attracted GST at the rate of 12% (entry 122 of 12% rate schedule). while other cartons falling under this heading attracted GST at the rate of 18%.

The disputes have arisen as regards applicable GST on fibre drums, which is partially corrugated (as to whether it is be treated as corrugated or otherwise).

Thus, the dispute gets resolved on account of the recommendation of the GST Council, in its 45th meeting, to prescribe a uniform GST rate of 18% on all goods classifiable under heading 4819 (with effect from 1st October 2021 under S. No. 153A of Schedule III of notification No.1/2017-Central Tax (Rate) dated 28.6.2017).

For the period prior to 1.10.2021, the Council upon taking note of the fact that there was confusion regarding the GST rates applicable on Fibre Drums, because of its peculiar construction (partially corrugated).

Thus, the council has decided that supplies of such Fibre Drums even if made at 12% GST (during the period from 1.7.2017 to 30.9.2021), would be treated as fully GST-paid.

Therefore, no action for recovery of differential tax (over and above 12% already paid) would arise. However, as this decision has only been taken to regularize the past practice in view of certain ambiguity, as detailed in para 14.1, no refund of GST already paid shall be allowed if already paid at 18%.

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