GST AAR Rules 12% Tax Rate on NFC Board Bonded with PVC Resin

The Andhra Pradesh Authority for Advance Ruling (AAR) mentioned that Natural Fibre Composite (NFC) Board manufactured using raw materials, and bonded together using Polyvinyl Chloride (PVC) resin as a bonding agent draws a Goods and Services Tax (GST) of 12% as per its GST classification.

Advance Ruling application under Section 97 of the Central GST Act, 2017 (CGST Act) in liaison with the Andhra Pradesh GST Act, 2017 (APGST Act) was filed by M/s Tra Plast Industries Pvt. Ltd. (Tra Plast), an entity engaged in manufacturing boards, doors and frames using NFC.

NFC is incurred via natural fibres like rice husk, rice grass, wheatgrass and coconut shell. NFC is compounded with PVC resin among other ingredients and then subjected to industrial procedures like extrusion, sizing, traction, and cutting following which the final product is received.

Tra Plast filed a query towards AAR whether ‘Natural Fibre Composite board manufactured by the Applicant including Natural Fibre, Calcium carbonate, recycling waste and other processing aid and PVC resin, wherein PVC acts only as a bonding agent’ shall be categorized as ‘Wood and Articles of Wood’ under Chapter 44 the Indian Customs Duty and attract GST at a rate of 12%.

Before the Andhra Pradesh AAR, the applicant as part of their submissions furnished a detailed composition of their NFC board and the percentage of each constituent ingredient in formulating their product, along with sample pieces.

It was mentioned to AAR that PVC resin is used merely as a binding agent, among other raw materials that still have wood profile characteristics and usage.

After considering the material on record the two-member Bench of the Andhra Pradesh Authority for Advance Ruling comprising Dr. K. Ravi Shankar, Commissioner of State Tax and B. Lakshmi Narayana, IRS, Joint Commissioner of Central Tax, laid reference to Schedule II of the Notification No.01/2017-Central Tax (Rate). Sl. No. 92 of Schedule-II contains Items under Customs Tariff Chapter 44 about ‘Wood and Articles of wood; wood charcoal’.

The AAR Bench under observations carried that “Natural Fibre Composite (NFC) Board\” manufactured by the applicant merits classification under Chapter 441193 of the Customs Tariff and attracts 6% CGST as per S.No.92 of Schedule II under Notification 1/2017-Central Tax (Rate) Dt. 28.06.2017 and 6% SGST under Notification No. II(2)/CTR/532(d-4)/2017 vide G.o. (Ms) No. 62 dated 29.06.2017 as amended”

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The AAR stated that a cumulative of 12% GST shall be levied to get applied on the NFC board that the applicant produces within the description and composition furnished by the applicant.