GST Rate on Pooja Oil Fixed at 5%: AAR Maharashtra Rules on Classification Under Heading 1518
Background and Context
The Authority for Advance Ruling (AAR), Maharashtra, recently delivered a significant ruling in the matter of In re Sapna Hitech Private Limited, addressing the GST rate applicable to a product commercially known as "Pooja Oil." The applicant, M/s. Sapna Hitech Private Limited (GSTIN: 27AATCS6100MIZV), filed an application under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017, seeking an advance ruling on the applicable rate of tax for a product it intends to manufacture.
The ruling is notable because it draws a clear distinction between the technical edibility of a product and its commercial and regulatory classification, establishing that labeling and intended market use are the decisive factors for GST classification purposes.
Nature of the Product and Applicant's Business Plans
M/s. Sapna Hitech Private Limited is a private limited company planning to enter the branded vegetable oil segment, encompassing both edible and inedible varieties — including sesame, soya, groundnut, rice bran, palm, and jojoba oils.
What is Pooja Oil?
The applicant proposed to manufacture "Pooja Oil" keeping in view the religious significance of lamp lighting in Indian households. Pure sesame oil (till oil) is traditionally regarded as the most auspicious oil for lighting lamps. However, owing to its high cost, it remains inaccessible to many consumers. With the intention of making such oil financially accessible, the applicant planned to blend approximately 99% of other vegetable oils (such as palm oil, rice bran oil, and soya oil) with 1% sesame oil (till oil), and package it in non-standard, smaller sizes at affordable price points.
Key product characteristics as proposed by the applicant:
- Composition: Mixture of palm/rice bran/soya oil (approximately 99%) with sesame oil (approximately 1%)
- Chemical nature: Not chemically modified; no hydrogenation, inter-esterification, or similar processes involved
- Perfume/fragrance: None added
- Edibility: Technically fit for human consumption
- Labeling: To be labeled as "Pooja Oil" and marked "Not for Human Consumption" in compliance with FSSAI regulatory requirements
- Shelf life: Intended for use up to 15 months from the date of manufacture, as against the standard 12-month edibility window for edible oils
Important Note: The applicant had not commenced manufacturing at the time of filing the application. The ruling, therefore, applies to a proposed product based on the declared characteristics.
The Central Legal Question
The primary question before the AAR was:
What is the rate of tax on "Pooja Oil" under the Maharashtra Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017?
The dispute essentially revolved around whether the product should be classified under:
- Schedule I of Notification No. 01/2017-CT (Rate) dated 28.06.2017 — attracting 5% GST, as argued by the applicant; or
- Schedule II of the same notification — attracting 12% GST, as contended by the jurisdictional officer.
Applicant's Arguments and Interpretation
Claim for Classification Under Entry 87 (HSN 1515)
The applicant argued that its product falls under Entry No. 87 of Schedule I of Notification No. 01/2017-CT (Rate), which reads:
"Other fixed vegetable fats and oils (including jojoba oil) and their fractions, whether or not refined, but not chemically modified."
Key submissions made in support:
- The entry uses the term "including Jojoba oil" — since jojoba oil is itself inedible, this entry does not restrict coverage to edible oils alone.
- The use of the word "oils" (plural) implies that blended or mixed oils are also covered within this entry.
- The absence of the word "single" or "unmixed" in the entry leaves room for blended vegetable oils.
- The entry at HSN 1515 encompasses "other fixed oils" and contains no express exclusion of inedible oils.