“Rapigro” is a “Plant Growth Regulator”, 18% GST Applies: AAR [Read Order]

The Authority for Advance Ruling (AAR), Gujarat has held that the applicant’s product “Rapigro” is a “Plant Growth Regulator” that attracts Goods and Services Tax (GST) at the rate of 18%.

The AAR clarified the classification of the product “Rapigro” under the Customs Tariff Act, 1975 and the Central Goods & Services Tax (CGST) Act, 2017 based on the observation that the same comes under the category of “Plant Growth Regulator” and not “fertilizer”.

The ruling stated that Rapigro is to be classified under 38089340, as a “Plant Growth Regulator”. Additionally, it confirmed that the applicable tax rate for Rapigro is 18% (9% CGST and 9% SGST), as per Sl. No. 87, Schedule III, notification No. 1/2017-CT(Rate) dated 28.6.2017.

The case revolves around Jivagro Limited, a Gujarat-based company, which is registered under the GST regime. Previously, M/s. Isagro (Asia) Agrochemicals P Ltd merged with P I Industries Ltd, and the B2C vertical of Isagro was transferred to M/s. Jivagro Limited, a newly incorporated subsidiary of PI Industries.

Before the merger, M/s. Isagro was engaged in the manufacture of the product Rapigro and was classifying it under TI 3507 of CETA '85.

However, Central Excise authorities disputed this classification and ordered it to be classified under TI 38089340, as a ‘plant growth regulator’.

The dispute over the classification of Rapigro led to various show cause notices (SCNs) pending before different authorities.

M/s. Jivagro Limited filed an application for an advance ruling seeking clarity on the correct classification of Rapigro under the Customs Tariff Act, 1975 and the Central Goods & Services Tax Act, 2017. They also want clarity on the rate of tax payable on Rapigro.

The applicant, represented by Ms. Sonia Gupta and Shri Ashok Dhingra argued that Rapigro should be classified under TI 31010099, as they believed it to be a bio-stimulant and therefore, falling under the category of “fertilizer”.

The AAR considered and examined the essential characteristics and technical composition of Rapigro as well as the circulars issued by the Central Board of Indirect Taxes and Customs (CBIC).

After a thorough examination, the AAR concluded that Rapigro, being a plant growth regulator, merits classification under TI 38089340.

Plant growth regulators are organic compounds that affect the physiological processes of growth and development in plants when applied in low concentrations. They stimulate specific growth areas, resulting in modified growth or even retardation of certain growth.

In contrast, fertilizers provide nutrients to promote plant growth for desired increased harvest.

The Authority highlighted that Rapigro is effective in very low concentrations, as per its technical bulletin and rate of application (2 ml/lt water or 200 ml/acre).

The AAR further reasoned that the product reduces the vegetative growth period without any negative impact on the overall duration of the productive phase of the plant, indicating characteristics typical of a plant growth regulator.

The applicant's reliance on various judgments and circulars, including those based on previous classifications, was found to be inapplicable by the Authority in the present dispute, as they did not align with the technical composition and characteristics of Rapigro.

The Authority comprising Milind Kavatkar (SGST Member) and Amit Kumar Mishra (CGST Member) concluded that Rapigro is to be classified as a plant growth regulator under the Customs Tariff Act, 1975 and the Central Goods & Services Tax Act, 2017.

The AAR also confirmed the applicable tax rate at 18% (9% CGST and 9% SGST) as per the relevant notification.

To Read the full text of the Order CLICK HERE

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