The Andhra Pradesh Authority for Advance Ruling ( AAR ) recently ruled that Natural Fibre Composite ( NFC ) Board manufactured using raw materials, and bonded together using Polyvinyl Chloride ( PVC ) resin as a bonding agent would attract a Goods and Services Tax ( GST ) of 12% as per its GST classification.
The Application for Advance Ruling under Section 97 of the Central GST Act, 2017 ( CGST Act ) in liaison with the Andhra Pradesh GST Act, 2017 ( APGST Act ) was filed by M/s Tra Plast Industries Pvt. Ltd. ( Tra Plast ), an entity involved in manufacturing boards, doors and frames using NFC.
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The NFC is made using natural fibers such as rice husk, rice grass, wheatgrass and coconut shell. The NFC is further compounded with PVC resin among other ingredients and later subjected to industrial processes such as extrusion, sizing, traction and cutting following which the final product is obtained.
Tra Plast queried before AAR whether ‘Natural Fibre Composite board manufactured by the Applicant comprising Natural Fibre, Calcium carbonate, recycling waste and other processing aid as well as PVC resin, wherein PVC acts only as a bonding agent’ would be classified as ‘Wood and Articles of Wood’ under Chapter 44 the Indian Customs Duty and attract GST at a rate of 12%.
The Applicant as part of their submissions before the Andhra Pradesh AAR submitted a detailed composition of their NFC board and the percentage of each constituent ingredient in formulating their product, along with sample pieces.
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It was reiterated before AAR that PVC resin is used only as a binding agent among the other raw materials which collectively still have the characteristic and usage of wood profiles.
The two-member Bench of the Andhra Pradesh Authority for Advance Ruling comprising Dr. K. Ravi Shankar, Commissioner of State Tax and B. Lakshmi Narayana, IRS, Joint Commissioner of Central Tax, after considering the material on record laid reference to Schedule II of the Notification No.01/2017-Central Tax (Rate).
Sl. No. 92 of Schedule-II contains Items under Customs Tariff Chapter 44 pertaining to ‘Wood and Articles of wood; wood charcoal’.
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In light of the observations, the AAR Bench ruled that “Natural Fibre Composite ( NFC ) Board” manufactured by the applicant merits classification under Chapter 441193 of the Customs Tariff and attracts 6% CGST as per S.No.92 of Schedule II under Notification 1/2017-Central Tax (Rate) Dt. 28.06.2017 and 6% SGST under Notification No. II(2)/CTR/532(d-4)/2017 vide G.o. (Ms) No. 62 dated 29.06.2017 as amended”
Concludingly, the AAR affirmed that a cumulative 12% GST would be applicable on the NFC board produced by the Applicant, subject to the description and composition submitted by the Applicant.
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