Fortified Rice Kernel Deemed to Attract 18% GST, Classified under Tariff item 1904 HSN under Chapter 19 of Customs Tariff Act: AAR [Read Order]

The Authority for Advance Ruling (AAR), Chhattisgarh has held that Fortified Rice Kernel (FRK) falls under the Tariff item of Harmonized System of Nomenclature (HSN) 1904 under Chapter 19 of Customs Tariff Act, 1975 attracting Goods and Services Tax (GST) at the rate of 18 per cent.

M/s. Brindavan Agrotech Private Limited furnished an application before the AAR, Chhattisgarh on the HSN classification and applicable tax rate for their product FRK under the GST law.

The applicant intends to manufacture and sell pellets of blended fortified rice flour, commonly known as Fortified Rice Kernels (FRK) in Chhattisgarh.

The AAR admitted the application for consideration on merits and analysed the process involved in fortifying rice and the composition of the product.

Shri Pawan Arora, representing the applicant, claims that the FRK falls under Chapter Heading 1103 of the Customs Tariff Act, 1975 and is taxable at the rate of 5% GST under entry no. 56 of Schedule I of Notification No. 1/2017-CT(Rate) if it is pre-packaged and labelled.

The appellant also claimed that, if the same is not pre-packaged and labelled, then exemption shall be allowed under entry no. 75 of Notification No. 2/2017-CT(Rate).

The AAR discussed the legal provisions related to the jurisdiction and binding nature of advance rulings and stated that the ruling shall be binding only on the applicant and the concerned or jurisdictional officer.

The authority considered the Chapter 11 of the Customs Tariff Act, 1975 which deals with products of the milling industry, and Chapter 19, which covers preparations of cereals, flour, starch, or milk, including pastry cooks products.

After examining the Customs Tariff Act, 1975 and relevant provisions of the GST law, the bench concluded that the Fortified Rice Kernels (FRK) fall under Tariff item 1904 of Chapter 19, which pertains to preparations of cereals, flour, starch, or milk.

The advance ruling referred to the agenda of the 45^th GST Council meeting, where it was recommended to classify FRK under chapter heading 1904 and also noted that the GST Council has recommended lowering the GST rate from 18% to 5% for FRK under certain schemes.

The Authority consisting of Smt. Sonal K. Mishra, Joint Commissioner and Shri Shravan Kumar Bansal, Additional Commissioner clarified that the correct classification of FRK is under Chapter Heading 1904. The applicable GST rate for goods classified under this heading, including FRK, is 18% (9% CGST + 9% SGST) or (18% IGST) as per entry no. 15 of Schedule III to Notification No. 01/2017-CT(Rate) dated 28.06.2017, as amended.

In the result, the AAR held that FRK proposed to be manufactured by the applicant merits classification under Chapter 19 subheading 1904 of HSN, attracting GST at the rate of 18% (9% CGST + 9% SGST) or (18% IGST).

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates