GST HSN Classification for Biodiesel and Diesel Blends
The Karnataka Authority for Advance Ruling clarified that HSN classification for biodiesel-diesel blends depends on whether petroleum content exceeds 70% by weight.
- Ruling
- KAR.ADRG 21/2026 dated 16.03.2026
- Dated
- 16 Mar 2026
- 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
- The company asked for HSN codes for B20 to B70 fuel blends.
- Blends with 70% or more petroleum fall under Heading 2710.
- Blends with less than 70% petroleum fall under Heading 3826.
- B20 and B30 are classified under 2710, while B40 to B70 fall under 3826.
In short
The company asked the Karnataka Authority for Advance Ruling (AAR) to decide the correct HSN (Harmonized System of Nomenclature) code for various blends of biodiesel and High-Speed Diesel (HSD). Because these mixtures contain both mineral oil and renewable fuel, it was unclear whether they should be taxed as petroleum products or chemical mixtures. The authority ruled that the weight of the petroleum content is the deciding factor for classification.
What has changed
How it worked before
Businesses were previously uncertain about how to classify biodiesel-diesel blends, often struggling to choose between Chapter 27 (mineral fuels) and Chapter 38 (chemical products) of the tariff schedule.
What has changed
The authority established a clear 70% weight threshold. If your blend is 70% or more petroleum, it is treated as a mineral fuel under Heading 2710. If it contains less than 70% petroleum, it is classified under Heading 3826 as a biodiesel mixture. This provides a specific rule to follow when filing your GST returns.
Who this affects
Manufacturers and suppliers of biodiesel and diesel fuel blends.
An example
GreenFuel Co. produces a B50 blend, which is 50% biodiesel and 50% diesel. Based on this ruling, because the petroleum content is below 70%, the blend falls under Heading 3826. GreenFuel Co. should use this HSN code on their invoices. They should document the weight percentage of their blend to justify this classification if questioned by their local tax officer.
What you should do
Use this ruling as a guide for your own classification, but remember that an advance ruling only legally binds the company that asked for it and their specific tax officer. If you are in the same business, you should consult with your tax advisor to see if this logic applies to your specific product mix before filing.
If you do nothing
If you apply the wrong HSN code, you risk paying the incorrect GST rate, which can lead to tax demands, interest, and penalties. A tax officer is not required to follow this ruling for your business and may disagree with your classification. Being wrong can result in a lengthy dispute process that costs time and money.
The terms explained
- HSN Code
- A standardized system of numbers used to classify goods for tax purposes. It ensures that products are taxed consistently across the country.
- Biodiesel
- A renewable fuel made from organic sources like used cooking oil. It is often mixed with traditional diesel.
- Advance Ruling
- A formal decision from tax authorities on how GST laws apply to a specific business situation. It provides clarity but only applies to the business that requested it.
The ruling in detail
Authority for Advance Ruling
M/s M11 Energy Transition Pvt. Ltd.
KAR.ADRG 21/2026 dated 16.03.2026 · Karnataka
Questions before the authority
- Determine the appropriate HSN Code under which the supply of the various diesel and biodiesel blends would fall: (a) B20, (b) B30, (c) B40, (d) B50, (e) B60, (f) B70
Facts
The applicant manufactures biodiesel from used cooking oil and intends to supply blends of this biodiesel with High-Speed Diesel (HSD) in varying proportions to large fleet operators. The applicant sought an advance ruling to classify these specific blends, ranging from B20 to B70, under the GST framework. The manufacturing process involves transesterification of used oils to produce renewable fuel.
Ruling
| Question | What the authority ruled |
|---|---|
| B20 (20% biodiesel + 80% HSD) | Sub-heading 271020, tariff item 27102020 Conforming to standards IS 16531 |
| B30 (30% biodiesel + 70% HSD) | Sub-heading 271020, tariff item 27102090 Classified as Other petroleum oil preparations |
| B40, B50, B60, B70 | Chapter 38, tariff item 38260000 Contains less than 70% by weight of petroleum oils |
The Authority ruled that the classification depends on the percentage of petroleum oil content by weight. Blends containing 70% or more of petroleum oils fall under Heading 2710, while those containing less than 70% fall under Heading 3826. Specifically, B20 is classified under 27102020, B30 under 27102090, and B40-B70 under 38260000.
Reasoning
The Authority relied on the **General Rules for the Interpretation** of the Customs Tariff and the HSN Explanatory Notes to distinguish between mineral fuels under Chapter 27 and chemical products under Chapter 38. It determined that the threshold of 70% by weight of petroleum oils is the **decisive factor** for classification. Consequently, blends with 70% or more petroleum content are classified under Heading 2710, while those with less are classified under Heading 3826 as biodiesel and mixtures thereof.
Provisions relied on
- Section 97(2)(a) of the CGST Act, 2017
- Section 97(2)(a) of the KGST Act, 2017
- Customs Tariff Act, 1975
- GST Rate Notification No. 01/2017-Central Tax (Rate)
For the practitioner
This ruling provides a **clear classification framework** for biodiesel-HSD blends based on the 70% petroleum weight threshold. It helps practitioners identify the correct HSN for various blend ratios, distinguishing between fuel-dominant blends (Chapter 27) and biodiesel-dominant blends (Chapter 38). It does not, however, determine the specific tax rates applicable to these HSN codes.
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/8-aar-m11_energy_transition_pvt_ltd-compressed.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
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