Page 33 - GSTL_13th August 2020_Vol 39_Part 2

2020 ] SUPPLY OF WOOD LOGS FOR PULPING — BOARD CIRCULAR IS BOON OR A BANE J41
16(GST)/2018, dated 9-10-2018 [2018 (18) G.S.T.L. 849 (A.A.R. - GST)] held that
“the supply of Eucalyptus/Subabul wood de-barked pulp wood in cut size, sup-
plied to various paper mills for manufacture of pulp falls under the Entry No.
198 of Schedule-I of Notification No. 1/2017-C.T. (Rate), dated 28th June, 2017
and attracts CGST @ 2.5% and SGST @ 2.5%.”.
Further , the Authority for Advance Ruling, Uttar Pradesh also held the
similar view in the case of M/s. Ruchi Enterprises, Amethi, Uttar Pradesh vide Rul-
ing No. 10/2018-19, dated 14-6-2018, reported in 2018 (17) G.S.T.L. 61 (A.A.R. -
GST). The said Authority held that “Wood Waste and scrap” (not usable as tim-
ber) used for pulping/manufacture of paper is to be classified under HSN 4401
and GST rate will be @ 2.5% CGST and @ 2.5% SGST (or @ 5% IGST) charged as
per Notification No. 1/2017-C.T. (Rate), dated 28-6-2017 against Sl. No. 198 and
rate as per Schedule-I.
C.B.I. & C. Circular
C.B.I. & C. vide its Circular No. 80/54/2018-GST, dated 31-12-2018 [2019
(20) G.S.T.L. C40] clarified “Applicability of GST rate on supply of wood logs for
pulping” at para 8 of the said circular is reproduced as under :
“8.1 Representation has been received seeking clarification on applicability
of GST rate on wood log for pulping. Wood in the rough (whether or not
stripped of bark or sapwood or roughly squared) is classified under heading
4403 and attracts 18% GST.
8.2 As per HSN, heading 4403 also covers.
“timber for sawing; poles for telephone, telegraph or electrical power
transmission lines; unpointed and unsplit piles, pickets, stakes, poles
and props; round pit-props; logs, whether or not quarter-split, for
pulping; round logs for the manufacture of veneer sheets, etc.; logs
for the manufacture of match sticks, wood ware, etc.”.
8.3 Thus, it is clarified that wood logs or any kind of wood in the
rough/timber, including the wood in rough/log/timber used for pulping
falls under heading 4403 and attract GST at the rate of 18%.”
In light of the above circular, field formations across the country have started issu-
ing communication to wood traders for payment before issue of show cause notice
and intimating to them that department will initiate show cause proceedings un-
der Section 73(1) for recovery of short payment of GST under Section 73(5) for the
past period July, 2017 to December, 2018 on the basis of Board’s Circular dated 31-
12-2018, wherein the said circular clarified HSN 4403 and GST rate 18% on wood in
logs, which are used for wood pulping hence it is proposed to recovery of short
paid of GST for the past supplies made to the various paper industries by charging
of GST @ 5% in all tax invoices for the period prior to the Board’s Circular dated
31-12-2018.
Justification of the Board’s Circular
Wood and articles of wood; wood charcoal etc. classified under Chapter
44 of the GST Tariff. Under this Chapter there is no specific sub-heading for
‘wood logs’ but it has been classified by the nature or further uses of wood logs.
Since wood in logs used for pulping and pulp used in the manufacture of paper
and paper board, hence wood in logs should be classified with the similar prod-
uct available under Customs/GST Tariff, namely eucalyptus, teak wood in
rough, Subabul wood, Sal wood, etc. These are similar categories of products
classified under Heading 4403 of GST Tariff. So ‘wood logs’ has to be classified
under Heading 4403. Due to ambiguity with regard to classification of “wood
GST LAW TIMES  13th August 2020  33