1. M/s. Shree Rajarajeshwari and Company, (hereinafter called “applicant”), No 259, Kiran Complex, 1st Cross, 3rd Main Road, Chamrajapet, Bengaluru-560018, having GSTIN number 29ABMPN5137G1ZC, has filed an application for Advance Ruling under Section 97 of CGST Act, 2017 read with Rule 104 of CGST Rules 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules 2017, in form GST ARA-01 discharging the fee of ₹ 5,000-00 each under the CGST Act and the KGST Act.

2. The Applicant is a proprietary concern and is registered under the Goods and Services Act, 2017. The applicant has sought advance ruling in respect of Classification of Pulpwood supplied to paper mills and the rate of tax (GST) thereon.

3. The applicant has furnished some facts relevant to the stated activity:

a. The applicant is engaged in supply of debarked Eucalyptus, Acacia, Subabul, Casurina, Pine Pulpwood in billets of required size to paper mills based on their requirement. (dia 1 “(top) to 4” (bottom) and length of 4′ to 5).

b. The applicant has appraised the fact that they are supplying Eucalyptus De-barked pulp wood, and exclusively used to obtain pulp, which an important raw material in paper manufacturing.

c. The applicant has stated that the classification of the following type of pulp wood is not mentioned in any schedule or Customs tariff act such as

1) With bark and debarked eucalyptus pulp wood

2) With bark and debarked subabul pulp wood

3) With bark and debarked acacia pulp wood

4) With bark and debarked casuarina pulp wood

5) With bark and debarked pine pulp wood

d. The applicant has stated that presently there is confusion in the interpretation of Section applicable to the above type of pulpwood by several buyers and has provided the details:

(i) Leading Paper Mills like M/s. J.K. Paper Ltd., Rayagada (Odisha), M/s. Bilt Graphic Papers and Products, Ballarsha (Maharashtra), M/s. Tamil Nadu Newsprint and Paper Ltd, Kagithapuram (Tamil Nadu) and M/s. Seshashayee Papers Ltd, Pallikal (Tamil Nadu) have advised suppliers to charge 5% GST for supply.

(ii) M/s. Grasim Industries Ltd, Kumarapatnam (Karnataka) and M/s. West Coast Paper Mills, Dandeli (Karnataka) have advised their suppliers to charge 18% GST for similar supply; and

(iii) M/s. Telangana Forest Development Corporation Ltd has charged 5% GST for supply of debarked eucalyptus pulp wood to M/s. ITC Bhadrachalam Paper and Boards Ltd, Bhadrachalam (Telangana),

(iv) M/s. Karnataka Forest Development Corporation Ltd, Bengaluru has issued internal advisory to charge 18% GST for supply of “wood in rough” (HSN Code 4403) interpreting this as pulp wood.

e. The applicant submits that they have purchased substantial quantity of acacia, eucalyptus and pine pulp wood in the stock yard of M/s. Mysore Paper Mills Ltd, Bhadravathi (Karnataka) and have been delivering to paper mills outside Karnataka state. Provisionally, M/s. Mysore Paper Mills Ltd had agreed to charge 5% GST on the pulp wood lifted with a rider that the applicant would be required to pay the difference of 13% GST if it is clarified as 18% by the GST Council. However, the buyers from the applicant are insisting for charging GST at 5%.

f. Hence, the applicant has requested for the advance ruling as to the rate of tax applicable on the supply of the said pulp wood.

g. The applicant submitted sample copies of invoices pertains to outward supply of debarked Acacia Pulp Wood to M/s. West Coast Paper Mills, Dandeli,(Karnataka) and M/s. Grasim Industries Limited, Kumarpatnam, (Karnataka) by the M/s. Karnataka Forest Department at the rate of 18 percent GST vide HSN code 4403. Similarly outward supply of debarked Eucalyptus Wood to M/s. Bilt Graphic Paper Products, Ballarsha, (Maharastra) by the applicant at the rate of 5 percent IGST Vide HSN 4401 on the same.

h. Being confused, the applicant is unable to apply for tenders as he is unable to quote the actual rate of GST on pulp wood to customers and execute the orders.

PERSONAL HEARING / PROCEEDINGS HELD ON 21.05.2018.

4. Sri Rajashekar Naregal, Proprietor appeared for personal hearing proceedings held on 21.05.2018 & reiterated the facts narrated in their application.

5. FINDINGS & DISCUSSION:

5.1 We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by Sri Rajashekar Naregal, Proprietor during the personal hearing. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts.

5.2 At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act.

5.3 The applicant has submitted a copy of the Purchase Order from Tamil Nadu Newsprint and Papers Limited. This purchase order provides for the specifications of the required wood to be supplied. The specifications are as follows:

a) Debarked Acacia Pulpwood

b) Length of the wood billets shall be 1.5 meter

c) The minimum diameter shall not be less than 2 inches

d) The maximum diameter shall not be more than 8 inches. Billets of diameter more than 8 inches is to be quartered by splitting and supplied.

e) The supplies shall be free from crooked, twisted, bend and “Y” & “V” shaped billets

f) The billets shall be completely debarked and totally free from bark, decayed/ dead wood billets shall not be supplied

In the light of the required specifications we examine the two competing Headings, namely 4401 and 4403.

5.4 Heading 4401 covers fuel wood, in logs, in billets, in twigs, in faggots or in similar forms; wood in chips or particles; sawdust and wood waste and scrap, whether or not agglomerated in logs, briquettes, pellets or similar forms. Further the Explanatory Notes to this Heading provide as follows:

a) Fuel Wood, which is generally in the form of :

(1) Short pieces of logs, usually with the bark

(2) Split Logs or billets

(3) Twigs, faggots, rough sticks, vine stems, tree stumps and roots

b) Wood in Chips or particles, i.e., wood mechanically reduced into small chips, (flat, rigid and roughly squared) or particles (thin and flexible) used for producing cellulose pulp by mechanical means, by chemical means or by combining mechanical and chemical means or for the manufacture of fibreboard or particle board. By virtue of Note 6 to this Chapter, the heading also includes similar products obtained, for example, from bamboo. Pulpwood presented in the round or quarter split is excluded (heading 44.03)

c) Sawdust, whether or not agglomerated in logs, briquettes, pellets or similar forms

d) Wood waste and scrap, not usable as timber. These materials are used in particular for pulping(manufacture of paper) and in the manufacture of particle board and fibre board and as fuel. Such waste and scrap includes saw mill or planning mill rejects; manufacturing waste, broken plank; old crates etc.

Comparison of the specifications narrated by the applicant and the nature of goods covered under the heading clearly show that the instant goods would not be covered under the Heading 4401.

5.5 Heading 4403 covers Wood in the rough, whether or not stripped of bark or sapwood, or roughly squared. Further the Explanatory Notes to this Heading provide as follows:

This heading includes timber in the natural state as felled, usually with the branches lopped off, and such timber stripped of its outer or both its outer and inner bark or from which merely the rough protuberances have been removed. It also includes wood from which the waste outer layers, consisting of the most recent growths (sapwood) have been removed for economy in transport or to prevent decay.

The principal products classified here, when of the above description, include: timer for sawing; poles for telephones, telegraph or electrical transmission lines whether or not quarter-split for, for pulping….

This clearly brings out that the quarter splits for pulping shall be covered under the Heading 4403

5.6 Further the applicant clearly expressed that supply of debarked Eucalyptus, Acacia, Subabul, Casurina, Pine Pulpwood in billets form of required size to paper mills. But it is not in the form of supply of debarked wood in pellet and briquettes form. Hence it comes under the heading of HSN 4403 of Wood in the rough, whether or not stripped of bark or sap wood or roughly square.

5.7 In this regard a Circular was issued by the Government of India bearing Circular number 80/54/2018-GST dated 31-12-2018 stating that representation had been received seeking clarification on applicability of GST rate on wood log for pulping. Wood in the rough (whether or not stripped of bark or sapwood, or roughly squared) is classified under heading 4403 and attracts 18% GST.

“timber for sawing; poles for telephone, telegraph or electrical power transmission lines; un pointed and un split piles, pickets, stakes, poles and props; round pit-props; logs, whether or not quarter-split, for pulping; round logs for the manufacture of veneer sheets, etc.; logs for the manufacture of match sticks, wood ware, etc.”

Thus, it is clarified that wood logs or any kind of wood in the rough/ timber, including the wood in rough/ log/ timber used for pulping falls under heading 4403 and attract GST at the rate of 18%.

5.8 The goods in question is verified and found that they are in the form of small logs (in the form of billets) and hence cannot be covered under HSN 4401. Hence they are squarely covered under the entry 4403 as clarified in the Circular No. 80/54/2018-GST dated 31-12-2018.

6. In view of the foregoing, we pass the following

RULING

The applicant is liable to pay CGST and SGST at the rate of 9 percent each by supply of debarked Eucalyptus, Acacia, Subabul, Casurina, Pine Pulpwood in billets of required size to paper mills vide HSN code 4403.