Referenceshave been received regarding a clarification as to whether simple fertilizers, such as MOP(Murate of Potash)classified under Chapter 31,and supplied for usein 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, 1975covers 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 melamineand 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 appliedto goods falling under Chapter 31 which are clearly to be useddirectly as fertilizers orin 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 linesof pre-GST tax incidence. The wording of the GST notification is similar to the central excise notification except certain changesto meet the requirementsof GST.Thesechanges were necessitated as GST is applicableonthesupply of goods while central excise duty was applicable on manufactureof 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 scheduleto the notification No.1/2017-Central Tax (Rate) dated 28.06.2017]. However, the fertilizers items falling under the above mentioned headings, which are clearlynot to be used as fertilizerattract 18% GST[S.No. 42 to 45 of the III scheduleto 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 fertilizerswhich are further used as soil or crop fertilizers. The phrase “other than clearly to be used as fertilizers” wouldnotcover such fertilizers that are used for making complex fertilizers for use assoil or crop fertilizers.

4. Thus,it is clarified that the fertilizers supplied for direct useas fertilizers, or supplied for usein 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)

F.No.354/255/2018-TRU (Part-2)