Whether GST rate of fly ask bricks is 5 % or 18 % as it is creating a confusion on reading of the Advance Rulling No. GUJ/GAAR/R/20/2020 Dated 02.07.2020 issued in case of Dipak Kumar Ramjibhai Patel?

The conclusion of the Advance Ruling mentioned was whether ‘Fly Ash Bricks’ manufactured and supplied by Dipakkumar Ramjibhai Patel (M/s. Mahalaxmi Cement products) are classifiable under Tariff item No.68159910 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975). Applicability of GST rate on the said product would be 12% GST (6% SGST + 6% CGST) upto 14.11.2017 and 18% GST (9% SGST + 9% CGST) with effect from 15.11.2017 as per Notification No: 01/2017-Central Tax(Rate) dated 28.06.2017 (as amended from time to time) issued under the CGST Act, 2017“ means GST rate of fly ash bricks is 18% after date 15.11.2017, but we need to be more clarity based on the following discussions:

RELEVANT NOTIFICATIONS:

Notification No. 01/2017-Central Tax (Rate) Dated 28.06.2017 | Schedule II Sl.No. 177 | 6815 | Fly Ash Bricks and Fly Ash Blocks. GST Rate – 6.00%

Notification No. 41/2017-Central Tax (Rate) Dated 14.11.2017 | Schedule I Sl.No. 225A | 6815 | Fly ash bricks or fly ash aggregate with 90 percent or more fly ash content” ; GST Rate – 2.50%

Notification No. 24/2018-Central Tax (Rate) Dated 31.12.2018 | Schedule I Sl.No. 225B | 6815 | Fly ash bricks or fly ash aggregate with 90 per cent or more fly a.sh content; Fly ash blocks”; GST Rate – 2.50%

REASON OF CONFUSION: Fly Ash Bricks GST rate was 12% (6% CGST + 6% SGST) vide notification 01/2017-Central Tax (Rate) Dated 28.06.2017 up to 15.11.2017 is fine in all aspects and there has no confusion.

But after amendment of the above notification vide new 41/2017-Central Tax (Rate) Dated 14.11.2017, “Fly Ash Bricks” Inserted in sl. no. 225A of Schedule-I (GST rate 5%) along with “fly ash aggregate with 90 percent or more fly ash content” under HSN 6815. The two products were clubbed together with the word “OR”, on the basis of which the AAR interpreted the line in this way that the “Fly Ash Bricks” is with 90% or more fly ash content & “Fly Ash aggregate” is also with 90% or more fly ash con-tent, which attracts GST rate 5%. But as per the industry practice and experience, Fly Ash Bricks never ever exceed the fly ash content of 70%, which is maximum. So, Fly Ash Bricks with more than 90% fly ash content does not get covered under Sl. no. 225A of notification no. 41/2017 & sl. no. 225B of 24/2018-Central Tax (Rate) Dated 31.12.2018. As the Fly Ash Bricks does not exceed Ash contains 90%, so the Authority stated that Since the ‘Fly Ash Bricks’ manufactured does not find any schedule for Fly Ash Bricks containing ash up to 60% So, the same will cover under sl.no. 453 of the  notification 01/2017-Central Tax (Rate) Dated 28.06.2017 means any Chapter Goods which are not specified in Schedule I, II, IV, V or VI will attract GST rate 18%.

JUSTIFICATION FOR GST APPLICABILITY ON FLY ASH BRICKS AT 5%: On reading of the minutes of the 23rd GST Council Meeting held on date 10th November 2017, it is understood that the GST rate of Fly Ash Bricks is 5% based on the following lines collected from the council meeting papers:

1. AGENDA: Sl. No. 40 of Annexure-II (A) in page no. 135 shows the Rationalization of GST rates on goods [based on recommendations of the Sub-Group of Fitment Committee]:

Sl. No.	HSN	Description	Present Rate	Recommended Rate
40	6815	Fly Ash Bricks	2%	5%

Justification

1. GST rate on Fly ash bricks was discussed in detail in the 21st GST Council meeting.
2. Clay bricks attract 5% tax. Fly-ash is a pollutant.
3. Clay bricks are made out of top fertile soil. As against that the fly ash bricks, use fly ash a pollutant.

• MINUTES OF MEETING: i) Based on the meeting discussion on Annexure II: Rationalization of GST rates on goods (based on recommendations of the Sub-Group of Fitment Committee) mentioned in page no. 19 in minutes book sl. no.19.02. :

Sl.     |  Recommendations

19.2 | The Honorable Minister from Odisha stated that at Sr. No.40 of Annexure II of the Agenda Notes to agenda item 6(i), the rate of tax on fly ash bricks was rightly proposed to be reduced from 12% to 5%. He suggested that fly ash aggregates, which were chip like products and consumed almost 90% of fly ash, should also be covered in this entry and should be charged to tax at the rate of 5%. Shri Tuhin Kanta Pandey, Principal Secretary (Finance), Odisha, suggested that fly ash aggregates should be classified under Chapter Heading 68 15. The Secretary suggested that rate of tax on fly ash aggregate with 90% or more fly ash content, falling under Chapter Heading 6815 may be reduced to 5%. The Council agreed to the suggestion.

ii) ln respect to the agenda item 6(i), the Council took the following decisions in minutes book sl. no.24 in page no. 24:

Sl. Council Decisions

(ii) Approve the rate of tax recommended by the Fitment Committee for goods listed in Annexure II;

(v) To reduce the rate of tax on fly ash aggregate with 90% or more fly ash content, falling under Chapter Heading 6815, from 18% to 5%.

DECISION: Sl.No. (D) (44) in page no. 18 shows the recommendations for changes in GST/IGST rate and clarifications in respect of GST rate on certain goods [As per discussions in the 23rd GST Council Meeting held on 10th November, 2017] :

Sl. No.	HSN	Description	Present Rate	Recommended Rate
44	6815	(a) Fly Ash Bricks	12%	5%
		(b) Fly Ash Aggregate with 90% or more fly ash content	18%	5%

Considering all above factors of 23rd GST Council Meeting papers like Agenda, Minutes of Meetings, Decision, it clearly shows that the proposal of Honorable Minister from Odisha was duly incorporated in the Agenda paper of 23^rd GST Council Meeting towards reduction of Fly Ash Bricks GST rate from 12% to 5% and accordingly it was duly noted in meetings Minutes Books and approved by the council. It was also clearly mentioned in the meeting decision paper that GST rate will be reduced from 12% to 5%.

According to the conclusion of 23^rd GST Council Meeting, notification no. 41/2017-Central Tax (Rate) Dated 14.11.2017 was released by the appropriate authority showing clear intention that “Fly ash bricks or fly ash aggregate with 90 per-cent or more fly ash content” attracts GST rate 5%. Mean there are two products covered in this notification under HSN 6815 and the word “OR” is just joining to the following separate products:

1ST 6815 Fly Ash Bricks (As it can never ever cross 90%) 5.00%

2ND 6815 Fly Ash Aggregate with 90 percent or more fly ash content 5.00%

Further another 24/2018-Central Tax (Rate) Dated 31.12.2018 was released to add the 3rd product in this HSN 6815 named ” Fly ash blocks” and it also covered under the same GST rate 5%.

Moreover, we can apply principles of Interpretation of Statutes to further solidify our contention: –

We can say, interpretation of Statutes is required for two basic reasons viz. to ascertain:

• Legislative Language – Legislative language may be complicated for a layman, and hence may require interpretation; and

• Legislative Intent – The intention of legislature or Legislative intent assimilates two aspects: i the concept of ‘meaning’, i.e., what the word means; and ii. the concept of ‘purpose’ and ‘object’ or the ‘reason’ or ‘spirit’ pervading through the statute. Necessity of interpretation would arise only where the language of a statutory provision is ambiguous, not clear or where two views are possible or where the provision gives a different meaning defeating the object of the statute.

 If the language is clear and unambiguous, no need of interpretation would arise.

 In this regard, a Constitution Bench of five Judges of the Supreme Court in R.S. Nayak v A.R. Antulay, AIR 1984 SC 684 has held:

 “… If the words of the Statute are clear and unambiguous, it is the plainest duty of the Court to give effect to the natural meaning of the words used in the provision. The question of construction arises only in the event of an ambiguity or the plain meaning of the words used in the Statute would be self defeating.” ( para 18)

The mischief rule is a rule of statutory interpretation that attempts to determine the legislator’s intention.

Originating from a 16th century case (Heydon’s case) in the United Kingdom, its main aim is to determine the “mischief and defect” that the statute in question has set out to remedy, and what ruling would effectively implement this remedy.

When the material words are capable of bearing two or more constructions the most firmly established rule or construction of such words “of all statutes in general be they penal or beneficial, restrictive or enlarging of the common law is the rule of Heydon’s case.

The rules laid down in this case are also known as Purposive Construction or Mischief Rule.

The mischief rule is a certain rule that judges can apply in statutory interpretation in order to discover Parliament’s intention. It essentially asks the question: By creating an Act of Parliament what was the “mischief” that the previous law did not cover? Heydon’s case

This was set out in Heydon’s Case [1584] 3 CO REP 7a.  where it was stated that there were four points to be taken into consideration when interpreting a statute:

1. What was the common law before the making of the act?

2. What was the “mischief and defect” for which the common law did not provide?

3. What remedy the parliament hath resolved and appointed to cure the disease of the commonwealth?

4. What is the true reason of the remedy? The office of all the judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the 1 7 cure and remedy, according to the true intent of the makers of the Act, pro bono publico.

The application of this rule gives the judge more discretion than the literal and the golden rule as it allows him to effectively decide on Parliament’s intent. It can be argued that this undermines Parliament’s supremacy and is undemocratic as it takes lawmaking decisions away from the legislature. Use of this Rule This rule of construction is of narrower application than the golden rule or the plain meaning rule, in that it can only be used to interpret a statute and, strictly speaking, only when the statute was passed to remedy a defect in the common law. Legislative intent is determined by examining secondary sources, such as committee reports, treatises, law review articles and corresponding statutes. This rule has often been used to resolve ambiguities in cases in which the literal rule cannot be applied.

CONCLUSION

Considering all above discussions and read together, it conclude that the intention of the Government was rightly proposed in Agenda to reduce the GST rate of HSN code 6815 99 10 from 12% to 5 % and it was duly approved by the Authority in minutes books of 23rd GST Council meeting & decision taken accordingly. Based on this decision, notification published in the portal dated 14.11.2017. So reading of “with 90 percent or more fly ash content” for both the “Fly Ash Bricks” and “Fly Ash Aggregate” is not sustainable and before “OR” is for independent product “Fly Ash Bricks” attract GST rate 5 % and after “OR” is for independent product “Fly Ash Aggregate with 90 percent or more fly ash content” attract GST rate 5 % under HSN code 9815 99 10.

Authors Note: – As per the sources and explanations in our above article, it is clear that upto 31.03.2022 the rate of GST on Fly ash bricks, with any % of fly ash content is 5%. However, as per the latest notification no. 1/2022 CT-R, dated 31st March, 2022, as applicable from 01.04.2022, the GST rate on fly ash bricks has been amended to 12% thereby clearing the entire confusion on this issue. This is a regressive step for the industry and public at large consequently increasing the cost of such items. Also, attention needs to be drawn towards notification no. 2/2022 CT-R dated 31.03.2022 and notification no. 3/2022 CT dated 31st March, 2022 and notification no. 4/2022 CT dated 31st March, 2022 wherein a concessional rate was allowed on complying with certain conditions and removing such manufacturers and traders from the benefits of Section 10 of the CGST Act, 2017.