12% GST Payable On Geo Membrane: Gujarat High Court

The Gujarat High Court has ruled that 12% GST is applicable on geo membranes.

The court observed that the product manufactured by the petitioner being Geo Membrane is classifiable would fall under Chapter 59 and not under Chapter 39 as held by the respondent, the Gujarat Advance Ruling Authority relying upon the decision of the Madhya Pradesh High Court in case of Raj Packwell Ltd. The petitioner, therefore, is liable to pay the 12% GST from 15.11.2017 onwards and not 18%.

Facts

The petitioner/applicant was a partnership firm which has come into effect from 13.10.2019, is manufacturer of Geo Membrane which is a textile fabrics. The petitioner firm is also registered under the provisions of the Central / Gujarat Goods and Services Tax Act, 2017. The product, Geo Membrane which is a textile product, is chargeable to GST as textile fabrics under HSN Code 59111000. As per the Department, it was chargeable as plastic Geo Membrane being an article of plastic to GST under HSN Code 39269090.

The petitioner submitted that Geo Membrane/Geo Grid fabrics are used for reinforcement of ponds, canals and such structures. HDPE reinforced Geo Membrane lined aquaculture ponds teamed with Biofloc technology is a highly beneficial bacterial colony based culture which keeps diseases at bay making it an ecologically sustainable symbiotic system. Biofloc technology ensures minimal water exchange and keep the pH levels steady by feeding on the nitrogen produced by the fish & shrimps. In conventional farming where Biofloc technology is not used nitrogen is flushed out through water exchange every 25-30 days to keep the aquatic animals disease free. The Biofloc uses up the nitrogen and converts it into proteins for the animals. For Biofloc technology to be used. Geo Membrane fine ponds are a must Ponds lines with Rainshield Reinforced Geo Membranes insulate the animals from diseases. Biofloc cuts down fish meal giving cost advantages to the farmers Production per unit area is high in bioflo system. The stocking destiny of animals in Geo Membrane lined biofloc pond is twice the density of an ordinary unlined pond. Aquaculture ponds using Bioflo technology can bring big benefits to aquaculture farmers.

The Geo Membranes i.e. Geo fabrics are fabrics of polyester yarns, which are manufactured on weaving machine by weaving process. It is an admitted position of fact in this case that Geo Grid (also known as Geo fabrics or Geo textiles) are fabrics of polyester yarns, which are manufactured by employing simple warp and weft (i.e. woof) weaving process. Geo fabrics are in the nature of coated fabrics.

Chapter 59 of the new Tariff covered “Impregnated, Coated. Covered or Laminated Textile Fabrics: and various varieties of such fabrics were specifically covered under Heading Nos. 5901 to 5910. Textile products and articles for technical use were covered under Heading 5911 of the Tariff. Geo fabrics being goods in the nature of coated textile fabrics for technical use, they specifically fall under Heading 5911 of the new Central Excise Tariff.

The petitioner has started the commercial production and supply of goods in its factory by the month of August, 2020 which attracted levy of GST and the rate of GST in accordance with the classification of the goods under the tariff which is based on the Customs Tariff framed by the Parliament on the basis of Harmonious System of Nomenclature (HSN).

Under Chapter 17 of the GST Act, a Scheme of Advance Ruling is framed by the Parliament. The petitioner, therefore, made an application for Advance Ruling on the question whether Geo Membrane was classifiable under HSN Code 59039090 or under HSN Code 59119090, on 20.11.2020.

The Gujarat Authority for Advance Ruling after hearing the application of the petitioner, passed an order rendering the Advance Ruling relying upon the decision of the Madhya Pradesh High Court in case of Raj Packwell Ltd.in respect of classification of plastic tapes and bags under the Central Excise Tariff and came to the conclusion that Geo Membrane produced by the petitioners merit classification under heading 39269090 chargeable to 18% GST from 15.11.2017 onwards.

Conclusion

The court directed the authority to apply the discounted rate of 12% of the GST on the product manufactured by the petitioner under HSN Code 59111000 of the Tariff. The petitioner is entitled to claim the refund on the excess GST @ 6% paid pursuant to the order of the respondent, the Gujarat Advance Ruling Authority, without claiming any interest.

Case Details

Case Name: Messrs Ananta Synthetic Innovations & Anr. Versus State Of Gujarat & Ors.