25.10.2022: ‘Coal rejects’ taxable at 5% GST: Punjab Authority of Advance Ruling

The Punjab Authority of Advance Ruling (AAR) has recently said that ‘coal rejects are to be classified under HSN 2701 and are taxable at 5 percent GST.

The decision was taken by two-member bench of Varinder Kaur and Viraj Shyamkarn Tidke in a case where applicant sought an advance ruling on the issue of whether the coal rejects whose invoice is raised by the applicant upon washery/job worker is taxable under the GST Act and Compensation Cess Act in the hands of the applicant.

The applicant asked the court to allow reversal of GST and compensation cess in terms of quantity of clean coal and coal rejects as it can be easily mapped by them, but there is no such provision as prescribed.

The court observed that coal rejects are to be classified under HSN 2701 and are taxable at 5 percent GST rate at Rs 400 PMT Compensation Cess.

“Where the goods are being received in lots or installments. the registered person shall be entitled to take credit upon receipt of the last lot or installment. Thus, if the applicant fulfils the eligibility conditions and if the type of ITC do not fall under exempt categories, the applicant is eligible to avail Input Tax Credit of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery/job worker for cleaning. Further, the “principal” shall be entitled to avail ITC in relation to goods sent directly to the premises of job-worker,” the order read.
“The formula prescribed under Rule 42 of CGST & PGST Rules, 2017 for manner of determination of input tax credit in respect of inputs or input services and reversal thereof will be applicable in both cases i.e. GST and Compensation Cess. Therefore, the provisions should be followed by the applicant and they have to make reversal in the proportion of exempt/taxable turnover.” it read.
Coal rejects are basically a by-product of the coal washing or coal beneficiation process in which after separation of beneficiated washed coal and Middlings, the rejects are left over as a portion of raw feed coal.
These are generated from the coarse circuit of the coal washery process. No additional crushing or blending is required for its usage.

Source: CNBC TV18

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