GST Rate for Envirotemp FR3 Dielectric Fluid: Maharashtra Advance Ruling
The Maharashtra Authority for Advance Ruling classified Envirotemp FR3 as an inedible preparation, making it taxable at 12% GST.
- Ruling
- NO.GST-ARA-08/2017/B-12 Mumbai, dt. 20/3/2018
- Dated
- 20 Mar 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Cargill India asked if their dielectric fluid qualified for a 5% GST rate.
- The Authority ruled the product is not a simple chemically modified vegetable oil.
- The fluid is classified as an inedible preparation under Schedule II.
- The final applicable GST rate is 12% (6% CGST and 6% SGST).
In short
The company asked the Maharashtra Authority for Advance Ruling (AAR) to decide the correct GST rate for its product, Envirotemp FR3. This fluid is made from soybean oil mixed with additives for use in transformers. The core question was whether it should be taxed at 5% as a modified vegetable oil or at 12% as an inedible preparation.
What has changed
How it worked before
Businesses often assumed that products derived from vegetable oils might qualify for lower tax rates intended for basic agricultural or chemically modified oils.
What has changed
The Authority decided that because the product contains proprietary additives that change its identity into a specialized coolant, it is an inedible preparation. This means it falls into a higher tax bracket of 12% instead of the 5% rate the company hoped for.
Who this affects
Manufacturers of industrial coolants or specialized chemical preparations derived from vegetable oils.
An example
Imagine a company producing a specialized lubricant for heavy machinery using a base of sunflower oil and proprietary additives. They might wonder if they can claim the lower 5% rate for modified vegetable oils. Based on this ruling, the tax department would likely view their product as an inedible preparation, subjecting it to the 12% rate instead.
What you should do
If you manufacture similar products, review your classification against this ruling. Remember that an Advance Ruling only binds the company that asked and its specific tax office; it is not a law that automatically applies to your business.
If you do nothing
If you apply a lower tax rate based on this ruling without confirming your specific product's classification, you risk a tax demand. A tax officer may disagree with your interpretation, leading to interest and penalties for short-payment of GST. Always seek professional advice before changing your tax classification.
The terms explained
- Dielectric fluid
- A specialized liquid that does not conduct electricity, used to cool and insulate electrical equipment like transformers.
- Inedible preparation
- A mixture or product that is not meant for human consumption, often created by adding chemicals to a base ingredient.
- HSN
- The Harmonized System of Nomenclature is an international code used to classify goods for taxation and trade purposes.
The ruling in detail
Authority for Advance Ruling
CARGILL INDIA PRIVATE LIMITED
NO.GST-ARA-08/2017/B-12 Mumbai, dt. 20/3/2018 · Maharashtra
Questions before the authority
- Whether Natural Easter Dielectric Fluid (hereinafter referred to as 'Envirotemp FR3') fall under Serial no. 90 of Schedule I of Notification No. 1/2017-State Tax (Rate) dated 29th June, 2017 issued under the MGST Act, 2017 and Notification No. 1/2017- Central Tax (Rate) dated 28th June, 2017 issued under the CGST Act, 2017 is taxable at the rate of 2.5% (State tax and Central tax)?
- Whether Envirotemp FR3 falls under Serial no. 27 of Schedule II of Notification No. 1/2017-State Tax (Rate) dated 29th June, 2017 issued under the MGST Act, 2017 and Notification No. 1/2017- Central Tax (Rate) dated 28th June, 2017 issued under the CGST Act, 2017 is taxable at the rate of 6% (State tax and Central tax)?
Facts
The applicant manufactures 'Envirotemp FR3', a dielectric fluid used in transformers, derived from refined soybean oil mixed with proprietary additives. The applicant sought a ruling on whether this product qualifies as a chemically modified vegetable oil under Serial 90 of Schedule I, attracting a 2.5% GST rate. The revenue authorities contended that the product is an inedible preparation of vegetable oil, falling under a different classification.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification under Serial 90 of Schedule I (2.5% rate) | Answered in the negative. The product is not considered a simple chemically modified vegetable oil. |
| Classification under Serial 27 of Schedule II (6% rate) | Answered in the affirmative. The product is classified as an inedible preparation of vegetable oil. |
The Authority ruled that the product does not fall under Serial 90 of Schedule I, as it is not merely a chemically modified vegetable oil but a distinct preparation. Consequently, it is classified under Serial 27 of Schedule II, which covers inedible mixtures or preparations of vegetable oils. The product is therefore subject to a total GST rate of 12% (6% CGST + 6% SGST).
Reasoning
The Authority reasoned that the addition of proprietary chemicals and additives transforms the soybean oil into a new commodity, specifically a transformer coolant, which loses its original identity as vegetable oil. It relied on the **Harmonized Commodity Description and Coding System (HSN)** notes, which state that products under Heading 1518 must retain their original fundamental structure. Since the product is an inedible preparation, it falls outside the scope of Serial 90 and into the residual category of **inedible mixtures or preparations** under Serial 27 of Schedule II. The ruling emphasizes that the product is a distinct commercial entity used as a coolant rather than a basic vegetable oil.
Provisions relied on
- Section 97 of the CGST Act, 2017
- Section 98 of the CGST Act, 2017
- Notification No. 1/2017-Central Tax (Rate)
- Notification No. 1/2017-State Tax (Rate)
- Tariff Heading 1518
For the practitioner
This ruling clarifies that specialized industrial preparations derived from vegetable oils, such as dielectric coolants, are likely to be classified as **inedible preparations** under Serial 27 of Schedule II rather than as basic chemically modified oils under Serial 90. Practitioners should note that the Authority places significant weight on the **commercial identity** and the transformation process of the final product. It serves as a warning that adding proprietary additives to a base commodity can shift the tax classification to a higher rate bracket.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/maharashtra_gst-ara-09_2017_dt_20.3.18_cipl.pdf
Legibility of the scan, as read: high.
Prepared 15-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.