GST on Coir-Pith Compost: Karnataka Advance Ruling KAR ADRG 10/2023
Coir-pith compost is a fertilizer, taxable at 5% when sold in pre-packed, labelled bags of 50 kg or less.
- Ruling
- KAR ADRG 10/2023, dated 17.02.2023
- 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
- Coir-pith compost is classified as an organic fertilizer.
- Sales in bags exceeding 50 kg are exempt from GST.
- Pre-packed, labelled bags up to 50 kg attract 5% GST.
- Nurseries are not considered institutional consumers for tax purposes.
In short
The company asked the Karnataka Authority for Advance Ruling (AAR) how to tax coir-pith compost based on bag size, branding, and the type of buyer. The authority clarified that because this product is an organic fertilizer, its tax status depends on whether it is sold in bulk or in smaller, pre-packed, and labelled retail bags.
What has changed
How it worked before
Businesses were uncertain whether coir-pith compost qualified for fertilizer exemptions regardless of packaging size or whether sales to nurseries counted as institutional consumption.
What has changed
The authority confirmed that coir-pith compost is a fertilizer. If you sell it in bags larger than 50 kg, it is exempt from GST. If you sell it in pre-packed and labelled bags of 50 kg or less, you must charge 5% GST, regardless of whether the buyer is a nursery or an individual.
Who this affects
Manufacturers and suppliers of organic fertilizers or coir-pith compost.
An example
A business sells coir-pith compost in 25 kg bags to local nurseries. Under this ruling, the business must charge 5% GST because the bags are 50 kg or less and are pre-packed. If the same business sells the product in 60 kg bags, those specific sales would be exempt from GST.
What you should do
Review your packaging sizes and labelling practices to determine if your sales qualify for the 5% tax or the exemption. Remember that an advance ruling only binds the company that asked and its specific tax officer; it is not a universal law for all businesses.
If you do nothing
If you incorrectly treat your sales as exempt, you risk a tax demand, interest, and penalties during an audit. A tax officer may disagree with your interpretation, and you cannot use another company's ruling as a legal defense for your own tax filings.
The terms explained
- Pre-packed and labelled
- Goods placed in a package of any nature, whether sealed or not, so that the product inside cannot be altered without opening the package and which bears a label.
- Institutional consumers
- Entities that buy goods for their own use rather than for resale or commercial trade, such as hospitals or government offices.
- Fertilizer (Control) Order 1985
- A government regulation that sets standards for the quality and sale of fertilizers in India.
The ruling in detail
Authority for Advance Ruling
M/s. Sri Lakshminarasimha Agro Products
KAR ADRG 10/2023, dated 17.02.2023 · Karnataka
Questions before the authority
- Whether Notification No.7/2022-Central Tax (Rate), dated 13-07-2022 applies to Coir-Pith Compost (HSN 53050040) mentioned in serial number 132-A of the Notification No.2/2017-Central Tax (Rate) dated 28-06-2017 as amended vide notification No.19/2018-Central Tax (Rate), dated 26-07-2018?
- The registered person sells coir-pith compost in 30 kg and above quantity bags with un-registered brand name "SURYA". In such cases, whether the registered person is liable to tax under the GST Acts?
- If the coir-pith compost in 30kg and above quantity bags are sold without any label (in plain bags), whether would it attract GST?
- If the registered person sells coir-pith compost in 25 kg and less pre-packed and labelled bags to nurseries who buys for consumption, whether in such cases GST is payable?
- Whether the nurseries, who are un-registered dealers, come under the definition of "Institutional consumers"?
- If the registered persons sells coir-pith compost with 30Kg and above pre-packed and labelled bags to nurseries who buys for consumption, whether in such cases GST is payable?
- Rule 3(b) of Legal Metrology (Packaged commodities) Rules, 2011, provides that the provisions of Chapter II of that Rules shall not apply to cement, fertilizers and agricultural farm produce sold in above 50 kg bags. Whether the coir-pith compost, which is also the bio-fertilizer, sold by the registered person, falls under this category and exempt from GST?
Facts
The applicant manufactures and supplies 'De-composed coir-pith compost' and 'Sterilized coir-pith compost' for use as organic manure in agriculture and horticulture. They purchase coir pith and process it by mixing with urea and gypsum, followed by a decomposition period of 10 to 12 months. The applicant sought clarity on the taxability of these products when sold in various quantities and packaging configurations to different types of buyers.
Ruling
| Question | What the authority ruled |
|---|---|
| Applicability of Notification No.7/2022 | Applies to Coir-Pith Compost other than pre-packed and labelled. Refers to Entry 132A of Notification No.2/2017-Central Tax (Rate). |
| Taxability of 30kg+ bags with unregistered brand | Liable to GST at 5% (CGST 2.5% and SGST 2.5%). As per entry No. 215 of Notification No.1/2017-Central Tax (Rate) as amended. |
| Taxability of 30kg+ bags without label | Liable to GST at 5% (CGST 2.5% and SGST 2.5%). Labelling is mandatory for pre-packed commodities. |
| Taxability of 25kg or less bags to nurseries | Liable to GST at 5% (CGST 2.5% and SGST 2.5%). As per entry No. 215 of Notification No.1/2017-Central Tax (Rate). |
| Nurseries as Institutional Consumers | Not covered under the definition. Nurseries use the product for commercial purposes. |
| Taxability of 30kg+ bags to nurseries | Liable to GST at 5% (CGST 2.5% and SGST 2.5%). As per entry No. 215 of Notification No.1/2017-Central Tax (Rate). |
| Exemption for bags above 50kg | Exempted from GST. Legal Metrology rules exclude these from Chapter II provisions. |
The Authority ruled that coir-pith compost is classified as a fertilizer and is subject to GST at 5% when sold in pre-packed and labelled bags up to 50 kg. Sales in bags exceeding 50 kg are exempt from GST. Nurseries are not considered institutional consumers, and the product cannot be sold without mandatory labelling for pre-packed commodities.
Reasoning
The Authority determined that coir-pith compost qualifies as an organic fertilizer under the Fertilizer (Control) Order 1985. It relied on the **Legal Metrology (Packaged Commodities) Rules, 2011**, specifically Rule 3, to distinguish between retail packages and those exempt from labelling requirements. The ruling hinges on the interpretation of 'pre-packed and labelled' commodities under **Notification No. 2/2017-Central Tax (Rate)** as amended by **Notification No. 7/2022-Central Tax (Rate)**. It concluded that nurseries do not meet the criteria for 'institutional consumers' because they use the product for commercial trade purposes.
Provisions relied on
- Section 97(2) of the CGST Act, 2017
- Notification No. 2/2017-Central Tax (Rate)
- Notification No. 7/2022-Central Tax (Rate)
- Notification No. 1/2017-Central Tax (Rate)
- Legal Metrology (Packaged Commodities) Rules, 2011
- Fertilizer (Control) Order 1985
For the practitioner
This ruling clarifies that coir-pith compost is treated as a fertilizer for GST purposes, making it **exempt only when sold in bulk bags exceeding 50 kg**. Practitioners should note that nurseries are explicitly excluded from the 'institutional consumer' definition, preventing tax-free procurement for commercial use. It settles the tax treatment for various packaging sizes but does not address products outside the scope of the Fertilizer (Control) Order.
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/knaar_order_no._102023_sri_lakshminarasimha_agro_products_1.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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