Circular No. 54/28/2018-GST dated 09.08.2018 i.r.o. classification of fertilizers supplied for use in the manufacture of other fertilizers at 5 % GST rate.

Circular No.: 54/28/2018-GST
Date of Circular: 9th August 2018
Relevant Sections and Rules:

• Central GST Act, 2017: General provisions on classification and GST rate
• Customs Tariff Act, 1975: Chapter 31 – Fertilizers
• Notification:
  • Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017
    • S. No. 182A to 182D (5% GST)
    • S. No. 42 to 45 of Schedule III (18% GST)

Summary of Circular:

This circular provides clarification on the applicable GST rate on fertilizers that are used in the manufacture of other complex fertilizers, based on representations regarding goods like MOP (Muriate of Potash) under Chapter 31.

1. Pre-GST Position:
   • Under the central excise regime, fertilizers under Chapter 31 used directly as fertilizers or in the manufacture of other fertilizers (including through intermediate stages) were eligible for concessional duty.

1. Post-GST Position – Tax Structure Maintained:
   • GST structure continues the same principle:
     • 5% GST is applicable on fertilizers under headings 3102, 3103, 3104, 3105, if they are:
       • Used directly as fertilizers, or
       • Used in the manufacture of other complex fertilizers used in agriculture.
     • 18% GST applies only if such goods are clearly not for use as fertilizers.

1. Clarification on Intent and Wording:
   • The wording “other than clearly to be used as fertilizers” in Notification No. 1/2017 is not intended to include those fertilizers that are used to make other fertilizers for agricultural use.
   • Hence, the concessional 5% GST rate applies even where fertilizers like MOP are used in the production of other fertilizers meant for agricultural use.

1. Final Clarification:
   • Supply of fertilizers (e.g., MOP) either:
     • For direct agricultural use, or
     • For manufacturing of complex fertilizers used as soil or crop fertilizers,
       will be liable to 5% GST.
     • Source: Circular No.: 54/28/2018-GST