GST on Rubber & Plastics — Natural Rubber 5%, Polymers 18%, Tyres 28%

TYRES AT 28% — REASONING: Pre-GST: tyres attracted 12.5% excise + 14.5% VAT + 2% CST = effective 27-30%. GST Council placed tyres at 28% to maintain revenue neutrality. ADDITIONAL CESS: Car tyres: 28% GST only (no cess). SUV tyres: 28% GST only. Truck/bus tyres: 28% GST only. No compensation cess on tyres (unlike cars/tobacco). WHY NOT REDUCED: (a) Revenue: tyre industry generates ₹4,000+ crore GST annually. (b) Industry is profitable — tyre companies (MRF, Apollo, CEAT) have 12-15% EBITDA margins. (c) Not classified as 'essential' — unlike food/medicine. (d) Luxury perception — vehicle ownership = ability to pay. ARGUMENTS FOR REDUCTION TO 18%: (a) Tyres are SAFETY items — worn tyres cause accidents. High GST = people delay replacement. (b) Commercial vehicles: 28% on tyres increases logistics cost → inflation. (c) Tractor tyres at 28% hurts farmers (agriculture input should be lower). (d) Bicycle tyres already reduced to 18% — precedent exists. (e) India's trucking industry (₹12 lakh crore) faces high tyre costs. INDUSTRY LOBBYING: ATMA (Automotive Tyre Manufacturers' Association) repeatedly petitions GST Council. 48th GST Council meeting: discussed but deferred. Expected: eventual reduction to 18% for truck tyres at minimum. Tractor tyres: strong political case for reduction (farmer vote bank).

CURRENT GST ON RECYCLING: Plastic waste/scrap collection: 18% (HSN 3915). Rubber waste: 5% (HSN 4004 — lower to encourage rubber recycling). Recycled plastic granules: 18% (SAME as virgin polymer). Recycled products (made from waste plastic): 18%. NO TAX INCENTIVE for recycled vs virgin plastic. PROBLEM: virgin plastic (from petroleum) and recycled plastic have SAME 18% GST. No financial motivation via GST to choose recycled. EU model: differential VAT on recycled content. India: no such mechanism in GST yet. WASTE COLLECTION: Waste picker/ragpicker selling plastic waste: below threshold (₹20L) — no GST. Scrap dealer (kabaadiwala) buying from pickers: if registered, charges 18% to recycler. Recycler: pays 18% on waste input, charges 18% on recycled output. ITC neutral in chain — but no INCENTIVE. EPR (Extended Producer Responsibility): Plastic producers must buy EPR certificates (plastic credits). GST on EPR certificates: 18% (service). This INCREASES cost of compliance — industry argues EPR should be exempt. PYROLYSIS: Converting plastic waste to fuel/oil: 18% on pyrolysis oil output. Carbon black from tyre pyrolysis: 18%. The entire circular economy chain is taxed at standard 18% — no preferential treatment. INDUSTRY DEMAND: (a) Reduce recycled plastic to 5% or 12% (below virgin 18%). (b) Exempt waste collection from GST. (c) Exempt EPR certificates from GST. (d) Reduce rubber waste to 0% (currently 5% — still better than plastic 18%). Government response: 'under consideration' — no timeline.

CLASSIFICATION PRINCIPLE — END USE vs DESCRIPTION: General rule: GST rate follows HSN classification, which depends on product DESCRIPTION in tariff, not just material. PLASTIC AUTO PARTS: If a plastic item is SPECIFICALLY designed and marketed for vehicle use: classified under Chapter 87 (vehicles/parts) → 28%. Same material/shape but for GENERAL use: Chapter 39 (plastics) → 18%. EXAMPLES: Plastic dashboard panel (car-specific design): 28% (HSN 8708 — parts of motor vehicles). Plastic storage container (general): 18% (HSN 3923 — plastic articles). Plastic bumper: 28% (auto part). Plastic garden pot (same injection moulding process): 18%. Rubber gasket for engine: 28% (auto part). Rubber gasket for plumbing: 18% (rubber article). HOW TO DETERMINE: (a) Is the item IDENTIFIABLE as solely/principally for vehicle use? Yes → 28% (Chapter 87). (b) Can it be used for multiple purposes? → Classify under material chapter (39 for plastic, 40 for rubber) → 18%. (c) In doubt: check specific HSN 4-digit/8-digit entry. PRACTICAL DISPUTE: O-ring (rubber). Same o-ring used in car engine OR industrial machinery. Manufacturer sells to auto company: 28% (buyer's use determines?). NO — manufacturer's classification at time of supply determines. If product DESCRIPTION in invoice says 'auto parts': 28%. If invoice says 'rubber o-ring' (general): 18%. AAR RULINGS: multiple conflicting decisions. Supreme Court: classification based on product as manufactured and put on market — not end-use by individual buyer.

RUBBER FARMER GST: Small rubber farmers (individual/family plantation): If annual turnover <₹20 lakh: NO registration needed. No GST charged on sale of raw rubber. Buyer (dealer/factory): purchases from unregistered farmer — NO RCM (reverse charge) on agriculture produce. Natural rubber is AGRICULTURAL PRODUCE — Section 2(5) CGST Act. Sale by agriculturist: exempt supply (even if technically 5% rate — farmer below threshold doesn't charge). If turnover >₹20 lakh (large estate): Must register. Charge 5% GST on natural rubber sale. Can claim ITC on: fertilizers (5%), pesticides (18%), machinery (18%), transport (5-18%). COOPERATIVE SOCIETIES: Rubber Producers' Societies (RPS) registered under cooperative law: If turnover >₹20 lakh (aggregate of society): must register for GST. Collects rubber from member-farmers: no GST (purchase from unregistered agriculturist). Processes (sheet rubber, block rubber): value addition. Sells to dealers/factories: 5% GST. ITC available: processing costs, packaging, transport. RUBBER BOARD: Rubber Board auctions: 5% GST on sale value. Cess collected by Rubber Board (rubber cess): outside GST (pre-existing cess — not subsumed). Board provides subsidies to farmers: not GST-taxable (government grant). MARKETING: When farmer sells through e-auction (Rubber Board platform): same 5% GST. If sold to exporter: zero-rated (0% with LUT). India exports sheet rubber/block rubber: zero-rated. Imported natural rubber: 5% IGST + 25% customs duty (highly protective).