2025 (7) TMI 195 - AAR - GST

Classification of goods - rate of GST - Rooter Trainer Cup made of plastic used exclusively for propagation of plants which an agricultural activity - to be classified under HSN 8201 90 00 or otherwise? Classification of goods - HELD THAT - The item in question is made of plastic and Plastics and Articles thereof fall under Chapter 39 of the Customs Tariff. The Chapter Notes to Chapter 39 do not exclude the subject product or any goods related to agricultural activity from its scope. Chapters 3901 to 3914 cover various types of plastics in primary forms while Chapter 3915 pertains to waste parings and scraps of plastics. Chapter 3916 covers monofilaments. Chapters 3916 to 3925 describe various plastic products with specific classifications none of which include the item under discussion viz. rooter trainer cups or similar agriculture-related plastic products. Tariff heading 3926 which is the last 4-digit heading under Chapter 39 covers Other Articles of Plastics. Since the product in question does not fall under any of the preceding specific headings it is appropriately classified under this residual heading. Upon verification of -the 6-digit classifications under heading 3926 it is found that there is no specific entry covering the subject product and therefore it falls under the residual sub-heading 3926 90 and further under the residual entry 3926 90 99. The product in question namely the Rooter Trainer Cup made of plastic is appropriately classifiable under Customs Tariff Heading (CTH) 3926 90 99 which shall be the applicable classification for the purposes of levy of GST. Applicable rate of tax - HELD THAT - The item appears to fall under SI. No. 45 of Schedule IV of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 which reads as Other articles of plastics and articles of other materials of headings 3901 to 3914 other than bangles of plastic PVC belt conveyor plastic beads and plastic tarpaulins . This entry attracts Central GST at the rate of 14% and an equal rate is applicable under the corresponding State GST notification. Further Sl. No. 137 of Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017 provides exemption to agricultural implements that are manually operated or animal-driven falling under Chapter 8201. Since the item in question neither qualifies under Chapter 8201 nor satisfies the condition of being a manually operated or animal-driven implement the exemption is not applicable in this case. Notification No. 41/2017-C.T.(Rate) (14-11-2017) omitted S. No.45 from Schedule IV w.e.f. 15.11.2017. Also in S. No. 111 for the entry in column (3) the entry Other articles of plastics and articles of other materials of headings 3901 to 3914 other than bangles of plastic plastic beads and feeding bottles was substituted. In practice Schedule III Sl.. 111 of Notification No. 1/2017-Central Tax (Rate) now covers 3926 at CGST 9% and SGST 9%.

Summary

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%."