2022 (2) TMI 992 - AAR - GST

Classification of goods - Glass- fibre Reinforced Gypsum Board which the Applicant is contemplating to manufacture would qualify as GRG board or not - new variant of gypsum board - Entry No. 92 of Schedule II of the Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017 - manufacture as per BIS standard IS-2095 is necessary for all GRG board to be covered under the entry Serial No. 92 of Schedule II of Notification No. 1/ 2017- Central Tax (Rate) dated 28 June 2011 or not? HELD THAT - Serial No. 92 of Schedule II of Notification No. 1/ 2017- Central Tax (Rate) dated 28 June 2017 provides specific rates for GRG board - an explanation (iii) to the said notification provides that Tariff item sub-heading heading and Chapter shall mean respectively a tariff item sub-heading heading and chapter as specified in the First Schedule to the Customs Tariff Act 1975 (51 of 1975). Whether the supply to be made by the appellant would be covered under the term Glass fiber Reinforced Gypsum Board (GRG) or otherwise? - HELD THAT - The main raw material of Gypsum Plaster board is Gypsum (more than 90%) which is mainly procured from mines and other raw material is paper and additives whereas the Glass Fibre Reinforced Gypsum Board is made-up of Phosphogypsum (more than 90%) which is a by product of phosphoric acid plant. Other raw material i.e. Glass fibre and additives is also used in the manufacturing of GRG Board - the raw materials which is used in gypsum board and GRG board are different. The applicant submitted that the proposed new variant of Gypsum Board is made-up of Gypsum glass fibre and additives the main raw material is Gypsum which is procured from the mines whereas GRG board is made up of Phosphogypsum which is a by product of phosphoric acid plant therefore the proposed new variant of Gypsum board to be manufactured by the applicant cannot be called as Glass-fibre Reinforced Gypsum Board (GRG) and cannot be classified in Serial No. 92 of Schedule II of Notification No. 1/2017- Central Tax (Rate) dated 28 June 2017 which provides specific rates for GRG board. Since the intended product cannot be treated as GRG Board the second question raised in respect of BIS Standard IS 2095 is not relevant and not required answer. Thus the new variant of gypsum board intended to be manufactured by the Applicant as per the specifications mentioned in Exhibit-2 could not be classified as Glass-fibre Reinforced Gypsum Board (GRG Board) and charged to GST at the rate of 12%.

Summary

Issues Involved:
1. Classification of the new variant of gypsum board.
2. Necessity of BIS standard IS-2095 for classification under the specified GST rate.

Issue-wise Detailed Analysis:

1. Classification of the New Variant of Gypsum Board:

The applicant, engaged in the business of building materials, sought to classify a new variant of gypsum board under the tariff item 6809 19 00 as Glass-fibre Reinforced Gypsum Board (GRG Board) to attract a lower GST rate of 12% under Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017. The applicant argued that the new variant, composed of gypsum plaster and glass fibre, should be classified under this tariff item. The applicant referred to classifications provided in the Indian Custom Tariff Act, 1975, and the relevant GST notifications, emphasizing that all kinds of plaster boards made of gypsum are covered under Chapter Heading 6809.

The applicant further argued that the distinction in classification is based on reinforcement materials. Boards reinforced with materials other than paper or paperboard, such as glass fibre, should be classified under tariff item 6809 19 00. The applicant cited the principle of literal interpretation and common parlance test, suggesting that GRG boards should be understood as gypsum boards reinforced with glass fibres without reference to BIS standards.

However, the ruling authority found that the main raw material for the applicant's gypsum board is gypsum procured from mines, whereas GRG boards are made from phosphogypsum, a by-product of phosphoric acid plants. This fundamental difference in raw materials led the authority to conclude that the new variant could not be classified as a GRG board under Serial No. 92 of Schedule II of the Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017.

2. Necessity of BIS Standard IS-2095:

The applicant questioned whether adherence to BIS standard IS-2095 is necessary for all GRG boards to be covered under the specified GST rate. The applicant cited various case laws, arguing that conformance to IS standards is not required unless explicitly mandated by the notification.

The ruling authority, however, deemed this question irrelevant since the new variant of gypsum board could not be classified as a GRG board. Therefore, the necessity of BIS standard IS-2095 for classification under the specified GST rate was not addressed.

Conclusion:

The authority concluded that the new variant of gypsum board intended to be manufactured by the applicant could not be classified as a Glass-fibre Reinforced Gypsum Board (GRG Board) and thus could not be charged to GST at the rate of 12%. Consequently, the question regarding the necessity of BIS standard IS-2095 was rendered irrelevant. The ruling emphasized the fundamental difference in raw materials used in gypsum boards and GRG boards, leading to the final decision.

Ruling:

Q.1. Whether the new variant of gypsum board intended to be manufactured by the Applicant as per the specifications mentioned in Exhibit-2 could be classified as Glass-fibre Reinforced Gypsum Board (GRG Board) and charged to GST at the rate of 12%Rs.
- Ans: No