Central Tax Circulars

CGST Circular 54/2018

To

Principal Chief Commissioners/Principal Directors General, Chief
Commissioners/Directors General, Principal Commissioners/Commissioners,
All under CBIC.

Madam/Sir,

Subject: Classification of fertilizers supplied for use in the
manufacture of other fertilizers at 5% GST rate- reg.

1) References have been received regarding a clarification as to
whether simple fertilizers,
such as MOP (Murate of Potash) classified under Chapter 31,and supplied
for use in manufacturing of a complex fertilizer, are entitled to the
concessional GST rate of 5%, as applicable in general to fertilizers
(i.e. fertilizers which are cleared to be used as fertilizers).

2.1 The matter has been examined. Chapter 31 of the Customs Tariff Act,
1975 covers
Fertilizers. The fertilizers are mostly used for increasing soil and land
fertility, either directly, or by use in manufacturing of complex
fertilizers. However, certain fertilizers and similar goods falling under
this Chapter may be used for individual purposes like use of molten urea
for manufacture of melamine and urea used in manufacturing of
urea-formaldehyde resins or organic synthesis.

2.2 In the pre-GST regime, the concessional duty rate was prescribed
for fertilizers falling
under Chapter 31 of the Tariff (notification No. 12/2012-Central Excise).
This concessional rate was applied to goods falling under Chapter 31
which are clearly to be used directly as fertilizers or in the
manufacture of other fertilizers, whether directly or through the stage
of an intermediate product.

3) In the GST regime, tax structure on fertilizers has been prescribed
on the lines of pre-GST
tax incidence. The wording of the GST notification is similar to the
central excise notification except certain changes to meet the
requirements of GST. These changes were necessitated as GST is applicable
on the supply of goods while central excise duty was applicable on
manufacture of goods. Accordingly, fertilizers falling under heading
3102, 3103, 3104 and 3105, other than those which are clearly not to be
used as fertilizers, attract 5% GST [S. No. 182A to 182D of the First
schedule to the notification No.1/2017-Central Tax (Rate) dated
28.06.2017]. However, the fertilizers items falling under the above
mentioned headings, which are clearly not to be used as fertilizer
attract 18% GST [S. No. 42 to 45 of the III schedule to the notification
No. 1/2017 Central Tax (Rate)]. The intention has been to provide
concessional rate of GST to the fertilizers which are used directly as
fertilizers or which are used in the manufacturing of complex fertilizers
which are further used as soil or crop fertilizers. The phrase “other
than clearly to be used as fertilizers” would not cover such fertilizers
that are used for making complex fertilizers for use as soil or crop
fertilizers.

4) Thus, it is clarified that the fertilizers supplied for direct use
as fertilizers, or supplied for
use in the manufacturing of other complex fertilizers for agricultural
use (soil or crop fertilizers), will attract 5% IGST.