In a recent case, the Gujarat High Court held that export of mango pulp Should attract 12% Goods and Service Tax ( GST ). Thus the petitioners would be liable to pay GST at the rate of 12% from 1st July 2017 on the product “mango pulp” and not at the rate of 5% ( as claimed by the petitioners ) or 18% (as claimed by the respondents) for the period from 01.07 2017 to 18.07.2022.
The special leave petition was filed by the petitioner Vimal Agro Products Ltd. The fact of the case was that the petitioner supplies “mango pulp” to 100% Export Oriented Unit which further exports such pulp outside the country after minor processing / re-packing.
Fresh mangoes were listed in the exemption Notification No.2/2017, When the GST regime was implemented with effect from 1st July 2017,while dried mangoes were listed in the Notification No.1/2017 in Schedule – II, for which rate of tax was 12% ( 6% CGST + 6% SGST ).
According to the 22nd GST Council Meeting held on 6th October 2017, they decided to reduce the rate of tax on sliced and dried mangoes from 12% to 5% in view of mango flour being taxable at 5%.
On the basis of the decision of the GST Council, dried mangoes were removed from Schedule – II containing goods attracting tax at the rate of 12% and instead a new Entry 30A was inserted in Schedule – I as “mangoes sliced, dried”, which attracted tax rate at 5% GST vide Notification No.34/2017 dated 13th October 2017.
Accordingly, the petitioners discharged tax liability at the rate of 5% on supply of “mango pulp” as “mango pulp” supplied by the petitioners was nothing, but pulp form of sliced mangoes.
Subsequently the 47th GST Council Meeting convened on 28th and 29th June 2022 decided to clarify that there was a third category of mangoes in HSN 0804 other than fresh and dried mangoes and that such mangoes were always intended to be taxed at the rate of 12%.
Thereafter the Central Board of Indirect Taxes and Customs ( CBIC ) issued an impugned circular dated 3rd August 2022 clarifying that “mango pulp” would be liable to attract GST rate at the rate of 12%.
The Joint Commissioner of GST issue a notice to the petitioner that “mango pulp” is classified in “Tariff Item” 0804 50 40 and the GST rate was chargeable at 18% from 1st July 2017 to 17th July 2022 by virtue of residuary Entry No.453 of Schedule – III of Notification No.1/2017. However the petitioner raised objections regarding the notice issued by the joint commissioner.
Subsequently the petitioner submitted that “there are only two types of mangoes covered under HSN 0804; one is fresh and another is dried and therefore, fresh mangoes would be covered under the exemption Notification No.2/2017 and dried mangoes would be covered by the Schedule of 5% and apart from the dried mangoes “mango sliced” is also mentioned in the Rate Schedule of 5%.”
When the petition was considered before the court the advocate Uchit Sheth for the petitioners submitted that HSN 0804 includes mangoes, fresh or dried. Also mango in pulp form would be covered under HSN 0804 which inter alia pertains to fresh and dried mangoes. There were only two slab rates available for HSN 0804 for the period in question (i) nil and (ii) 5% which would cover fresh as well as dried mangoes. The petitioner paid tax at the higher rate of 5% as there was no entry for HSN 0804 in the Schedule for 12% slab rate.
Further the counsel reference is made to the decisions of the Supreme Court in the case of Commissioner of Central Excise vs. Mysore Electricals Industries Ltd argued that the Central Board of Indirect Taxes and Customs had clarified that during the period in question, the rate of tax applicable on “mango pulp” would be 5% and the Board cannot be allowed to resile from its opinion.
Advocate Hetvi Sancheti for the respondents submitted that “mango pulp” was not classified anywhere and therefore, the tax is leviable under residuary entry no.453 at 18%.
It was observed the court that when the GST Act was implemented with effect from 1st July 2017, fresh mangoes were listed in the exemption Notification No.2/2017 while dried mangoes were listed in rate Notification No.1/2017 in Schedule – II, for which rate of tax was prescribed at 12%, as per the broad classification of mangoes in HSN segregating into fresh and dried.
Further In the 22nd GST Council Meeting held on 6th October 2017, it was decided to reduce the rate of tax on sliced and dried mangoes from 12% to 5%. Accordingly, by notification no. 34/17 Entry no.30A was inserted prescribing rate of 5% for mango sliced and dried. However, “mango pulp” was not included in the Entry 30A though the General Chapter Note of Chapter 8 of HSN includes fruits, pulps .
Although the the GST Council in its 47th meeting clarified that there was a third category of mangoes in HSN 0804 other than fresh and dried mangoes and that such mangoes were always intended to be taxed at the rate of 12%.
Accordingly the division bench observed that the GST Council has clarified in its 47th meeting that tax rate would continue to apply at 12% other than “mango sliced, dried” for which the GST rate was reduced to 5% as per the recommendations of 27th meeting of the GST Council.
Thus the petitioner is liable to pay GST at the rate of 12% as per Entry no. 16 from 01.07.2017 and not 5% as per Entry No.30A, which provides for “mangoes sliced, dried” only.
After analyzing the facts and arguments of both parties, a division bench of Justice Bhargav D. Karia and Justice Niral R. Mehta held that Once the GST Council has clarified that the mangoes (other than mangoes sliced, dried) would attract 12% GST and would not attract reduced rate at 5% as recommended by the GST Council in its 22nd meeting, therefore the petitioners would be governed by the GST rate at 12%.
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