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Fertilizers supplied for direct use or for manufacturing other complex fertilizers attract a 5 percent GST rate. The Tax Research Unit issues this clarification following questions about concessional rates for goods under Chapter 31 of the Customs Tariff Act 1975. The 5 percent rate applies to goods falling under headings 3102, 3103, 3104, and 3105 when supplied for direct agricultural use or for manufacturing other complex fertilizers. Goods clearly not used as fertilizers remain subject to an 18 percent rate.
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Circular No. 54/28/2018-GST
F. No. 354/255/2018-TRU (Part-2)
Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)
North Block, New Delhi
Dated, $9^{\text{th}}$ August, 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.
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.
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.
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.
Yours faithfully,
Dr. Ajay K. Chikara
Technical Officer (TRU)
