GST rate clarifications on cattle feed may lead to disputes

Disputes may arise over goods and services tax (GST) rates on cattle feed made from residual products of the alcohol industry, mineral rights, UPS inv­erter, and external battery after the fin­ance ministry iss­ued clarifications.

The clarifications, issued by the tax research unit (TRU) under the department of revenue following GST Council decisions in Lucknow last month, say dried distillers’ grains with soluble (DDGS), which is made out of the waste product of molasses, sugarcane and corn used by the alcohol industry, will attract 5 per cent tax rate. TRU said so because DDGS falls under the category of residues and will get similar treatment in terms of GST rate as is given to other residues. 

Rajat Mohan, senior partner AMRG & Associates, said the alcohol industry generates waste products that have gallons of water content. The Ministry of Environment, Forest and Climate Change had prevented companies from dumping this waste into rivers. To abide by the directions, alcohol companies started processing the waste to convert it into DDGS which is used for cattle feed.

Unlike residues, which fall under the harmonised system of nomenclature code of 2303, cattle feed falls under the HSN code of 2309 which don't attract any GST, contends Mohan.

Abhishek Jain, tax partner, EY said: “Industry would also look forward to clarification about tax race to be charged in a situation where separate prices are not known and a single price is charged for both items.”

TRU clarified that royalty given to state governments for rights of mineral exploration will attract 18 per cent GST from July 1, 2017, to December 31, 2018. From January one, 2019, the rate schedule has already been amended and it was put under an 18 per cent tax rate.

Abhishek Rastogi, partner at Khaitan & Co, said the clarification concerning the mining rights would be subject to judicial scrutiny and test of constitutionality as the amount paid by the mining companies to the government are statutory payments.