GST rate of 5% applicable on sale of rejected paddy seeds which is not fit for human consumption: AAR

The applicant is engaged in the business of running a rice and this Advance Ruling deals with the classification and applicability of GST on sale of rejected paddy seeds which is not fit for human consumption and could be used for industrial usage, Cattle feed production, Manure production etc.

The ruling is sought on:

1. Classification and applicability of GST Rate on the Sale of Rejected Paddy Seed in a bag of quantity more than 25KG.
2. Applicability of S.No. 70 of Notification No. 02/2017 dated 28.06.2017
3. Determination of liability to pay tax on supply of rejected paddy sale.
4. As the rejected paddy is further categorized based on its usage such usage as Animal Feed, Cattle Feed, Poultry Feed, Industrial use, Manure etc. Would it make any differential classification under each category from the GST perspective based on Harmonized System of Nomenclature?
5. If the answer to the above is affirmative, then provide the HSN classification & GST rate based on usage separately.

Advance Ruling:

(a) Rejected paddy seed would merit classification under chapter heading 100610, subject to the compliance of the stipulations and conditions as mentioned in the Section note and chapter note specified therein.

(b) The exemption from the whole of tax as provided under Sr. no 70 of Notification no. 02/2017-Central Tax (Rate) dated 28.6.2017 as amended vide Notification no. 07 / 2022-Central Tax (Rate) dated 13.7.2022 is not eligible for supply of “Rejected paddy/ Damaged paddy” for the reasons as discussed above.

(c) “Rejected paddy / Damaged paddy” per se supplied by the applicant, procured by them although merits classification under chapter 100610 subject to adherence of the conditions as stipulated under the chapter note and section note discussed supra, would be leviable to tax @2.5% CGST + 2.5% CGGST.

(d) Regarding categorization of rejected paddy based on its usage such as animal feed, cattle feed, poultry feed, industrial use, manure etc., this authority finds that for want of adequate details regarding the process undertaken by the applicant through which such rejected paddy would be converted to animal feed, cattle feed, manure etc., no conclusive ruling regarding classification from the GST perspective based on HSN could be delivered, as discussed in the above paras.

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