GST Rate for Vegetable Oil Transformer Fluids Settled at 12 Percent
Maharashtra AAR ruled that vegetable oil-based transformer fluids with additives attract 12% GST as inedible preparations under HSN heading 1518.
- Ruling
- GST-ARA-23/2017-18/B-31, Mumbai, dt. 09/05/2018
- Dated
- 09 May 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
- Company asked if vegetable oil transformer fluids qualify for 5% GST.
- Products contain over 98.5 percent vegetable oil and performance additives.
- AAR ruled the fluids are inedible preparations under heading 1518.
- The ruling applies a 12 percent GST rate instead of 5 percent.
In short
M/s M&I Materials India Private Limited imported and sold transformer fluids made from rapeseed and soya oils blended with performance additives. The company asked whether these products qualified for a 5% Goods and Services Tax (GST) rate under Schedule I or a 12% GST rate under Schedule II of Notification No. 1/2017-Central Tax (Rate). The central dispute was whether adding small amounts of performance chemicals turns vegetable oil into a specialized industrial preparation.
What has changed
How it worked before
Before this ruling, businesses dealing in modified vegetable oil products often assumed that high vegetable oil content allowed them to claim the concessional 5% GST rate under Schedule I.
What has changed
The Maharashtra Authority for Advance Ruling (AAR) decided under Order GST-ARA- 23/2017-18/B-31 that adding performance-enhancing additives turns the base oil into an inedible industrial preparation. As a result, dielectric transformer fluids fall under Tariff Heading 1518 and Entry 27 of Schedule II. This fixes the applicable GST rate at 12% (6% CGST and 6% SGST) instead of the lower 5% rate.
Who this affects
Importers, chemical manufacturers, and distributors who sell vegetable oil-based transformer fluids, industrial lubricants, or modified oil preparations.
An example
A chemical manufacturer in Gujarat blends 99% soya oil with 1% anti-oxidant chemicals to create transformer coolant. They want to know if they can charge 5% GST like raw vegetable oils. Following the reasoning in this ruling, tax authorities would treat this blend as an inedible preparation under tariff heading 1518, making it subject to 12% GST.
What you should do
Review your product formulations and Harmonized System of Nomenclature (HSN) codes for industrial oil blends. Remember that an advance ruling binds only the applicant and their specific tax office. If you want legal certainty for your own products, you must file a separate advance ruling application.
If you do nothing
If you classify specialized vegetable oil fluids under the 5% GST rate instead of 12%, tax authorities can demand the unpaid 7% tax difference during an audit. You may also have to pay interest on the shortfall and face penalties for incorrect tax classification.
The terms explained
- Input Tax Credit
- The GST you pay on business purchases, which you can subtract from the GST you collect on your sales.
- HSN Code
- An international standard numbering system used to classify products for tax calculation.
- Advance Ruling
- A formal decision by tax authorities answering a specific business's legal question about tax rates or rules.
- Tariff Heading
- A specific numerical category in tax law that determines which GST rate applies to a group of goods.
The ruling in detail
Authority for Advance Ruling
M&I MATERIALS INDIA PRIVATE LIMITED
GST-ARA-23/2017-18/B-31, Mumbai, dt. 09/05/2018 · Maharashtra
Questions before the authority
- What is the correct Harmonized System of Nomenclature (HSN) code and the applicable GST rate for our products MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) and MIDEL eN 1215 (soya oil based dielectric transformer fluid) in terms of Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017?
Facts
The applicant imports and sells MIDEL eN 1204 (rapeseed oil based) and MIDEL eN 1215 (soya oil based), which are chemically modified vegetable oil-based dielectric transformer fluids used for insulation and cooling in transformers. The products consist of over 98.5% natural triglyceride ester blend and less than 1.5% performance-enhancing additives. The applicant sought an advance ruling on whether the products qualify for a 5% GST rate under Entry 90 or Entry 88 of Schedule I, or fall under Entry 27 of Schedule II of Notification No. 1/2017-Central Tax (Rate).
Ruling
| Question | What the authority ruled |
|---|---|
| HSN code and GST rate for MIDEL eN 1204 and MIDEL eN 1215 dielectric transformer fluids | Tariff Heading 1518, Entry 27 of Schedule II, taxable @ 12% GST (6% CGST + 6% SGST) Classified as inedible preparations of vegetable oils under Tariff Heading 1518 |
The Authority held that the impugned products fall under **Schedule Entry 27 of Schedule II** of Notification No. 1/2017-Central/State Tax (Rate) under **Tariff Heading 1518**. Consequently, the products are subject to GST at the rate of **12%** (6% CGST and 6% SGST).
Reasoning
The AAR observed that the products are not mere vegetable oils or fats in their natural or simple modified state, but are specialized industrial dielectric transformer fluids. While part 1 of Tariff Heading 1518 (covered by Schedule I Entry 90) requires that vegetable oils retain their original fundamental structure, part 2 covers inedible mixtures or preparations of vegetable fats or oils. By adding performance-enhancing additives and adapting the vegetable oil base to serve as transformer dielectric fluid, a distinct commodity is formed. Therefore, the products constitute **inedible preparations of vegetable oils** under part 2 of Heading 1518, covered specifically by **Entry 27 of Schedule II**.
Provisions relied on
- Section 96, CGST Act, 2017
- Section 98, CGST Act, 2017
- Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 (Schedule I Entry 88, Schedule I Entry 90, Schedule II Entry 27)
- Customs Tariff Act, 1975 (Heading 1516, Heading 1518)
For the practitioner
This ruling establishes that modified vegetable oil-based industrial fluids formulated with additives (such as dielectric transformer fluids) do not qualify for the concessional 5% GST rate under Schedule I. When vegetable oil bases are adapted into specialized functional preparations, they are classifiable as **inedible preparations under Schedule II (12% GST)** under Tariff Heading 1518.
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/mah_aar_23_2017-18_b-31_m_and_i_materials_india_pvt_ltd.pdf
Legibility of the scan, as read: high.
Prepared 17-10-2026.
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