Classification of fertilizers supplied for use in the manufacture of other fertilizers at 5% GST rate. - GST - States - 054/28/2018-GST

Circular No. 54/28/2018-GST No. 12-19/2017-18-EXN-GST-(519)-6623-40 Government of Himachal Pradesh, Excise and Taxation Department To 1. The Additional Commissioner of State Taxes and Excise, South Zone, Shimla-9, H.P. 2. The Deputy Commissioner of State Taxes and Excise, Central Zone, North Zone, Flying Squad NZ/ SZ/ CZ. 3. The Asstt. Commissioner of State Taxes and Excise, Shimla, Solan, BBN Baddi, Sirmour, Bilaspur, Hamirpur, Mandi. Kullu, Chamba, Kangra, Revenue Distt Nurpur and Una, H.P 4. The Asstt. Commissioner of State Taxes and Excise, Incharge Distt. Kinnour, H.P Dated Shimla-9 13th March, 2019. Madam/Sir, Subject: Classification of fertilizers supplied for use in the manufacture of other fertilizers at 5% GST rate. References have been received regarding a clarification as to whether simple fertilizers, such as MOP (Murate of Potash) classified under Chapter 31,and supplied for use in manufacturing of a complex fertilizer, are entitled to the concessional GST rate of 5%, as applicable in general to fertilizers (i.e. fertilizers which are cleared to be used as fertilizers). 2.1 The matter has been examined. Chapter 31 of the Customs Tariff Act, 1975 covers Fertilizers. The fertilizers are mostly used for increasing soil and land fertility, either directly, or by use in manufacturing of complex fertilizers. However, certain fertilizers and similar goods falling under this Chapter may be used for individual purposes like use of molten urea for manufacture of melamine and urea used in manufacturing of urea-formaldehyde resins or organic synthesis. 2.2 In the pre-GST regime, the concessional duty rate was prescribed for fertilizers falling under Chapter 31 of the Tariff (notification No. 12/2012-Central Excise). This concessional rate was applied to goods falling under Chapter 31 which are clearly to be used directly as fertilizers or in the manufacture of other fertilizers, whether directly or through the stage of an intermediate product. 3. In the GST regime, tax structure on fertilizers has been prescribed on the lines of pre-GST tax incidence. The wording of the GST notification is similar to the central excise notification except certain changes to meet the requirements of GST. These changes were necessitated as GST is applicable on the supply of goods while central excise duty was applicable on manufacture of goods. Accordingly, fertilizers falling under heading 3102, 3103, 3104 and 3105, other than those which are clearly not to be used as fertilizers, attract 5% GST [S. No. 182A to 182D of the First schedule to the notification No.1/2017-State Tax (Rate) dated 30.06.2017]. However, the fertilizers items falling under the above mentioned headings, which are clearly not to be used as fertilizer attract 18% GST [S. No. 42 to 45 of the III schedule to the notification No. 1/2017 State Tax (Rate)]. The intention has been to provide concessional rate of GST to the fertilizers which are used directly as fertilizers or which are used in the manufacturing of complex fertilizers which are further used as soil or crop fertilizers. The phrase other than clearly to be used as fertilizers would not cover such fertilizers that are used for making complex fertilizers for use as soil or crop fertilizers. 4. Thus, it is clarified that the fertilizers supplied for direct use as fertilizers, or supplied for use in the manufacturing of other complex fertilizers for agricultural use (soil or crop fertilizers), will attract 5% IGST. 5. This circular shall come into force w.e.f. 09.08.2018. 6. Difficulty, if any, in the implementation of this circular may be brought to the notice of this office immediately. (Rajeev Sharma, IAS) Commissioner of State Taxes and Excise, Himachal Pradesh