Fact: M/s. Saro Enterprises manufacture and market disposable plastic items like lunch trays, spoons and other plastic packaging products including Plastic Seedling Trays which is used for paddy transplantation. These trays are solely used for agricultural purpose for growing paddy, and generally called Agricultural Seedling Trays’. They market the trays to the end users, basically farmers as well as small dealers who further make the sale of these trays to farmers. ‘Agricultural Seedling Trays’ are used manually for preparing seedling and it is neither a part of any machine nor it is used with any machine/ electronically driven. Under Tamil Nadu VAT the goods were exempted as Agricultural Implements’ as per advance ruling obtained by them. Under GST, they state that the goods are agricultural implements under Chapter 82OI which is exempted as per SL. No. I37 of Notification No 2/2O17-Central Tax dt June 28, 2017 as amended from time to time.
Issue Involved: Clarification on classification and taxability of Agricultural Seedling Tray under GST.
Held: The Hon’ble AAR of Tamil Nadu vide Advance Ruling Order No. 16/AAR/2018 dated September 27, 2018 stated that on combined reading of section note 3 and chapter notes 82 and description of goods covered under Tariff heading 8201 reveals that the goods covered under this Section XV have to be made of base metals or should be articles of base metals.’ Base metals as per Section Note above do not include plastics’. Further, chapter 82 covering ‘Tools, implements, cutlery, spoons and forks, of base metal, parts thereof of base metal’ should necessarily have a blade, working edge, working surface or other working part of base metal. However, the tray itself is not a part of any machine or used with any machine or electronically driven nor is it an accessory of any agricultural machinery. Rice planting machinery do not need these seedling trays to function and hence cannot be classified as parts or accessories of agricultural machinery. Therefore, Agricultural Seedling Trays made of Plastic manufactured by the Applicant are classifiable under CTH 39269099 under Notification No. 01/2017- Central Tax (Rate) dated June 28, 2017 at Sl. No. 111 of Schedule III as amended along with corresponding State Notification, taxable at 18% GST (CGST plus SGST).