GST Rate On Bricks With Less Than 90% Fly Ash Content To Be Charged At 5% Instead Of 18%: Gujarat High Court

On September 25, 2024, the Gujarat High Court ruled on the GST applicable to fly ash bricks and blocks with less than 90% fly ash content, confirming that these products are eligible for the lower GST rate of 5% rather than the 18% rate, which applies to items that do not meet the 90% fly ash threshold. This decision overturned prior rulings by the Advance Ruling Authority and its Appellate Authority.

Case Title: M/s Shree Mahalaxmi Cement Products Through Its Director Mr Dipakkumar Ramjibhai Patel vs State of Gujarat & Ors.

Key Points of the Case

  • Fly Ash: This by-product of thermal power plants is used to make eco-friendly bricks, which are lighter, cost-effective, and have a smooth finish compared to traditional clay bricks.
  • Initial Taxation: When GST was first implemented, fly ash bricks were taxed at 12%, but a 2017 amendment reduced the GST rate to 5% for these bricks.
  • Petition Filed: M/s Shree Mahalaxmi Cement Products, a manufacturer of fly ash bricks, contested the ruling that their bricks should be taxed at 18% due to containing less than 90% fly ash. They argued that the authorities had misinterpreted the content requirement.

Arguments

  • Petitioner’s Counsel: Claimed that the authorities did not account for the specifics of their manufacturing process. The counsel referenced a 2009 Ministry of Environment notification requiring only 50% fly ash content for classification, asserting that the 90% requirement was incorrectly applied. They also noted a GST Council recommendation to tax fly ash bricks at 5%.
  • Government’s Position: The government maintained that fly ash bricks with 40-60% fly ash content do not qualify for the 5% rate, arguing instead that the 18% rate should apply due to the lower fly ash content. This position was also supported by previous GST Council decisions.

Court’s Decision

The Court clarified that, based on Circular No. 179/11/2022-GST dated August 3, 2022, the 90% fly ash content requirement is only applicable to fly ash aggregates, not to fly ash bricks. This circular also removed the 90% threshold from the description of fly ash bricks and blocks as of July 18, 2022.

Final Ruling

The High Court held that fly ash bricks and blocks manufactured by the petitioner qualify for a 5% GST rate per Notification No. 24/2018 dated December 31, 2018. The court set aside the orders of the Advance Ruling Authority and Appellate Authority, affirming that the 5% rate applies to these products.

Relevant Notifications

  • Notification No. 04/2018-Central Tax (Rate) dated December 31, 2018.
  • Circular No. 179/11/2022-GST dated August 3, 2022.

This judgment provides clarity on the GST rate for fly ash bricks and supports the use of these sustainable materials at a favorable tax rate.