The Gujarat High Court has ruled that the Geomembrane used for waterproof lining fabrics is subject to a 12% GST rate, rather than the previously applied 18%. The court has instructed the GST department to refund the excess 6% paid by the petitioner.
The case involved a partnership firm that has been manufacturing Geomembranes, a type of textile fabric, since October 13, 2019. Registered under the Central and Gujarat Goods and Services Tax Acts, the firm argued that Geomembrane, classified under HSN Code 59111000, should be taxed at the 12% rate applicable to textile fabrics. However, the GST department had classified it under HSN Code 39269090 as a plastic product, imposing an 18% GST rate.
The petitioner, MESSRS Ananta Synthetic Innovations & Anr, detailed the manufacturing process of Geomembrane, which involves high-density polyethylene granules and a lamination process to produce waterproof fabric. This fabric is used primarily for lining ponds and canals, especially in biofloc aquaculture systems, which benefit from its waterproof properties.
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It had initially sought an Advance Ruling on whether the Geomembrane should be classified under HSN Code 59039090 or 59119090. The Gujarat Authority for Advance Ruling ruled in December 2020 that it should fall under HSN Code 39269090, resulting in the higher GST rate of 18%. The petitioner challenged this decision, citing previous judgments that classified similar products under Chapter 59, which carries a 12% GST rate.
The Bench of Justices Bhargav D. Karia and Niral R. Mehta reviewed the case M/s.CTM Technical Textiles Ltd. v. Union of India, noting that previous judgments had classified similar products as textiles under Chapter 59 rather than plastics. The court concluded that the Geomembrane, a textile product, should indeed be classified under HSN Code 59111000 and be subject to the 12% GST rate. Consequently, the high court directed the GST authorities to apply the 12% GST rate from November 15, 2017, and to refund the excess GST paid by the petitioner. The petitioner is entitled to a refund without interest. It ruled absolutely in favour of the petitioner.
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