GST-free on dried coconuts used for human use that have been shelled or peeled

Fact and issue of the case

M/s. EMS COCOS, having registered office at No. 3/1, Pottaiyandipuram, Mulaikadai, Potayandiporambu, Sokkanur, Kinathukadavu, Coimbatore,642109, is a partnership concern, engaged in the activities of Manufacturing and Trading of Coconut, Copra and coconut shells. M/s EMS COCOS (hereinafter called the ‘Applicant’) is registered under the GST with GSTIN:33AAIFE2739G1ZL. The Applicant has sought Advance Ruling on the following question:-

“Whether the dried coconuts (shelled or peeled) used for human consumption shall be classified under Chapter 8, HSN 0801, on which rate of tax is ‘nil’.”

The Applicant has submitted the copy of application in Form GST ARA – 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.

The Applicant has stated, inter-alia, that they are paying 5% GST rate for both Dried coconut and milling copra. Now, the Applicant desires the clarification as to whether the edible copra (dried coconut) shall be classified under HSN 08011920 and taxed at NIL GST rate. Along with form GST ARA 01 the applicant has attached copies of HSN and journal on European Union showing that Coconut fresh or dried, whether or not shelled or peeled under Chapter 0801. Also, they had submitted copy of AAR Order No. 39/ARA/2019 dated 27.08.2019 in the case of M/s Shree Parshwanath Corporation and copy of step by step guide to produce edible copra and milling copra in their factory, supported by photos.

Personal hearing was held in digital platform on 15.06.2022, wherein Shri. Vivek Sharma, Manager (Authorised Representative-AR), appeared for the hearing virtually and reiterated their submissions. On being queried about the source of copra, the AR replied that coconut was procured from farmers in Kerala and Tamilnadu. To the query as to whether they have facility for oil extraction, AR replied that they do not have oil extraction facility and that they supply copra for human consumption and oil extraction.

Observation of the court

We observe that vide notification no. 2/2017 Central Tax Rate dated the 28th June, 2017, the supply of goods ‘Coconuts, fresh or dried, whether or not shelled or peeled’ are exempt from GST. The relevant portion of Notification no. 2/2017 Central Tax Rate dated the 28th June, 2017 are as under:

47.

0801

Coconuts, fresh or dried, whethere or not shelled or peeled

Also, vide notification no. 1/2017 Central Tax Rate dated the 28th June, 2017, the supply of goods ‘Copra other than of seed quality’ attracts 5% GST (CGST 2.5%+ SGST 2.5%). The relevant portion of Notification no. 1/2017 Central Tax Rate dated the 28th June, 2017 are as under:

66.

1203

Copra other than of seed quality

The short point that arises in the instant case is whether the goods in question viz., dried coconuts (copra in trade parlance) meant for human consumption merit classification in Chapter Heading 0801 thereby attracting ‘Nil’ rate or in Chapter Heading 1203 thereby attracting 5% GST (CGST 2.5%+ SGST 2.5%).

Hence, as the Circular cited supra clearly clarifies that the whole unbroken kernel could be taken out of shell only when it converts to copra. The Applicant takes the copra cuts into half, sun dries and segregates manually based on the round shape of copra, free of dirt/dust and send it as edible copra and the rest of copra which are irregularly shaped, dusty are sent to oil milling units. But as the Circular clearly states, Copra is classified under heading 1203 irrespective of use. Hence, the impugned goods of the Applicant is only Copra and the same shall be classified under Heading 1203 thereby attracting GST rate of 5% vide entry at SI.No. 66 of Schedule I of 1/2017-Central Taxes (Rate) dated 28.06.2017.

The Applicant has cited Authority for Advance Ruling, Tamilnadu’s Order no. 39/ARA/2019 dated 27.08.2019 as evidence in his favour. But, on perusal of the said Order we find that the order pertains to the withdrawal of application by that applicant and merits of the case were not looked into by the Members of the AAR and hence, it is not relevant to the issue in hand.