V.S. Trading Company ., In re

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, TAMILNADU

M/ s. V.S. Trading Company (Prop. P. Vasudevan) at 71/122-A, Palaniappa Colony, Annathanapatty, Salem-636002 (hereinafter called as the “Appellant”) is engaged in the business of Trading Tapioca Flour purchased from the registered dealers and effects sale within and outside the state of Tsmilnadu. The appellant was supplied with Tapioca flour of 50Kgs Bags under Bill of Supply classifying the same under Tariff heading 1106 stating the product is exempted/NIL rated. They are registered under the GST Acts with GSTIN 33ACYPV6634M1ZK.

2. The Appellant had sought Advance Ruling on the following questions, viz,

1. Classification of goods, i.e Tapioca Flour obtained by crushing the dried root, and remnants of tapioca roots/ tubers.

2. Applicability of Notification issued under the provisions of Act in. respect of goods falling under entry No. 78 and tariff item 1106 of Part-A of exempted goods, and tariff item 1106 in St. No. 59 of Part-C of schedule I of the said Act.

3. Determination of the liability to pay tax in respect of the said goods, tariff No. 1106 as mentioned in SI. No. 78 of Part -A of exempted goods, and SI. No. 59 of Part-C of I schedule to the Act.

4. Whether such trader/ dealer is required to be registered.

3. Authority for Advance Ruling (AAR) vide order No. 25/AAR/2023 dated 20-06-2023 had ruled that the product is classifiable under HSN 230310 as ‘Residues of starch manufacture and similar residues’ liable to tax @5%; that the notification referred by the applicant is not applicable to them and the applicant is liable to be registered subject to the conditions prescribed under Section 22 of the Act.

4. The appellant sought rectification from the AAR for the reason the AAR have wrongly misunderstood the process of preparation of Tapioca Flour and hence have classified wrongly under 230310 as ‘Residues of Starch Manufacture’ liable to tax @ 5% instead of classifying the same as 1106 which attracts NIL rate of tax.

5. Aggrieved by the above decision, the appellant preferred an appeal before the Appellate Authority to set aside/modify the impugned advance ruling passed by the Authority for Advance Ruling. The appellate authority vide Order-in-Appeal No. AAAR/4/2025(AR) dated 27-06-2025 have remanded the case back to the lower authority for fresh consideration and passing of appropriate order after following the principles of natural justice.

6. Accordingly, the application filed by the applicant is taken afresh for consideration.

7. The facts of the case are no different from the earlier facts submitted by the applicant. The applicant is a dealer/trader of ‘Tapioca Flour’ received by them in gunny bags of 50Kgs and 70 Kgs which they supply to the prospective customers. They procure the goods with tariff-heading 1106 and supply the goods to their customers under the same tariff heading. The goods classified under 1106 attracts NIL rate of tax. Therefore, the applicant claims exemption from payment of GST for the said product which they classify under 1106. Accordingly, they sought clarification as to the classification of the said product, applicability of exemption notification, rate of tax applicable on the classification of the product and whether the trader/dealer is required to be registered under GST.

8. PERSONAL HEARING

Personal hearing was held as scheduled on 11-08-2025 and Shri. P. Vasudevan, Proprietor Shri. A. Jayaseelan, General Secretary, Salem City Chamber of Commerce 86 Shri. D. Ganapathi Subramaniarn, GST Practitioner appeared for the personal hearing as Authorised Representatives of the applicant. AR explained the process followed by the manufacturers and the product being dealt by them as a trader who procures it from the starch manufacturers. AR further informed that the product received by them are exempted and hence they are making exempted supplies. AR further claimed that the applicant is eligible for exemption provided under Notification No. 02/2017-CT (Rate) dated 28-06-2017, as the product is classifiable under Tariff Heading 1106 as ‘Flour’ which attracts NIL rate of duty. As requested by the members, the applicant subsequently submitted the process of manufacture done by the Stage-I and Stage-II manufacturers certified by them.

9. WRITTEN SUBMISSION DATED 11-08-2025 FURNISHED DURING THE PERSONAL HEARING: 

> The appellant stated that the said product tapioca flour/Thippi flour is obtained from crushing tubers of tapioca or manioc or cassava. The purchase and sale of tapioca flour/Thippi flour other than packaged and labelled is exempt by virtue of Tarif item 0714 read with 11062020, and by Notification No. 02/2017-CT (Rate) dated 28-06-2017

> The product is manufactured only from wet thippi coming out, and separated from the initial stage of crushing of tapioca obtained fresh from the farmers. Many different and distinct manufactured products emerge from crushing the tapioca roots.

> In state-I at the factory of manufacture of starch/ sago, the tapioca tubers purchased from farmers is washed, peeled and crushed in the factory. The impure and waste fibrous wet thippi is segregated and collected separately which is dried and sold as dried thippi to the manufactures of taioca flour.

> In Stage-II, the small manufacturers crush the dried thippi into tapioca four and kappi waste and sold as exempted goods.

> In Stage-III, the traders/ applicant purchase the above tapioca flour from stage-II manufacturer supply to customers within and across the states.

> They have stated that in the erstwhile TNGST Act, 1959 and TNVAT Act, 2006, the said products thippi/kappi are specifically included in the schedule. However, under GST Act, the said product Thippi/tapioca flour is not specifically classified in the tariff Chapters. In the absence of specific entry in the GST Tariff, the said product would only be classified under Chapter heading 110620 on rationale basis.

> Though Thippif tapioca flour is produced in the course of Starch manufacture, the said product id separated during initial process itself and nothing to do with production of starch or sago. When the waste product thippi is segregated in the sago factory, it is sold to the manufacturers down the line for making flour for sales to traders. Hence, manufacture of starch and sago is carried out by the sago factory by a separate processing which is different from production of tapioca/thippi flour.

> Starch has wide range of industrial usage in the food industry and sago is used directly for human consumption. Thipppi, kappi is separately processed for animal feed at low cost.

> The applicant further submits that the said product obtained is only from crushing of tapioca roots and not from starch or starch residue and shall not be classified under 230310.

> Finally, for the above reasons, the applicant reiterates and contend that Thippi/tapioca flour is not obtained from starch or starch residues and hence the said product would only fit in the entry of 11062020 and not under 2303.

DISCUSSION AND FINDINGS

10. We have carefully considered the submissions made by the appellant in their application and additional submissions made during the personal hearing along the documents furnished by them.

11. The issue to be decided in this case is classification of the product, applicability of exemption notification, determination of tax liability and whether such traders are required to be registered or not.

12. The applicant is a trader of ‘tapioca flour’ within and across the states. The goods are purchased in 50 Kgs/70 Kgs gunny bags with bill of supply from the suppliers as exempted goods with classification under 1106. The applicant, as a trader, in turn, supplies the goods as such under a sale invoice as ‘exempted/Nil rated goods’ since no value is added on the goods purchased by them. The applicant required advance ruling on the queries above for their product.

13. The appellant sought to classify their product under 1106 as

1106 “Four, meal and powder of the dried leguminous vegetables of heading 0713, of sago or of roots or tubers of heading 0714 or of the products of Chapter 8″

1106 20 – of sago or of roots or tubers of heading 0714:

11062010 — of sago

11062020 — of manioc (casava)

14. From raw manioc roots, one of the major products prepared is manioc (casava) flour classified under 1106 2020 which attracts Nil rate of GST. If the commodity is supplied as pre-packed and labelled commodity, bearing a brand name, it is chargeable to GST @ 5%. The other product manufactured is the manioc(casava) starch falling under 1108 1400 which attracts 12% of GST.

15. As the method of manufacture was not clearly stated by the applicant in the previous application/appeal, the appellate authority has directed to furnish a certified copy from the manufacturers to ascertain the exact process of manufacture of the said product, namely ‘tapioca flour’.

16. The applicant after the personal hearing, as requested by the members and as directed in the appellate order, has furnished the method of manufacture of their product in their regional language which is translated to English for better understanding. The process of manufacture of Starch powder and Sago pearl is done by the Stage-I Manufacturer while the making of Tapioca Flour/Thippi/Kappif Sago pith is done by the Stage -II manufacturers. The certified processes are provided by both the manufacturers, the details of which is enumerated below.

STAGE-I MANUFACTURING: 

> Raw Manioc is normally grown more in Salem and Namakkal Districts. These are procured directly from farmers who grows them.

> The raw manioc is then cleaned in the machine to remove mud and other impurities.

> Then the outer skin of the roots is peeled and washed. Then it is transferred to crushing section.

> The peeled roots are crushed in a grinding machine. The milk obtained during the crushing process is stored in large storage tanks.

TAPIOCA FLOUR: 

> The fibrous part after crushing is the residue waste which is called as Thippi’. Thippi obtained is wet and hence is dried to get ‘dry thippi’ and sold as such.

> As per TNGST Act, 1959 and TNVAT Act, 2006, this thippi/kappi is included in the third schedule and tax exemption was provided by the State Government for sale of this Thippi/Kappi.

> As suggested by GST officers, this product namely ‘Sago pith(Waste Thippi) – HSN code 0714 – is chargeable to 0% GST and supplied.

> This product namely, thippi/kappi is not consumable by humans but is used as an animal feed. Hence, it is not sold/ supplied to SAGO.

STARCH MANUFACTURE

> After crushing, the casava milk is mixed with water and stored in storage tanks in slurry form for two days.

> After two days, water stays above the slurry and the wet starch is precipitated at the bottom. This wet starch is collected and dries for two to three days to get ‘dry starch.

> This dry starch is classified under the HSN 1108 and GST at the rate of 12% is paid while making supply, This is used for human consumption in the food industry and sold and supplied through SAGO SERVE.

SAGO MANUFACTURE

> Dry starch is sent to sizing Section where it made into small spheres and then transferred to roasting section where is is converted to Sago after roasting. This sago pearls are classified under HSN 1903 and GST @ 5% is discharged while supplying the product.

> Since, Tapioca Starch and Sago are used for human consumption, these are sold through SAGO SERVE.

> As tapioca Thippi is not for human consumption, it is used as an animal feed. This tapioca thippi is not sold through SAGO SERVE but are sold in open market.

STAGE-IX MANUFACTURING: 

> Thippi/Sago pith in the dried foiiu is procured from the sago manufacturer with HSN code 0714 chargeable to Nil rate of tax.

> This thippi is ground in a pulveriser machine and classify them under HSN 11062020 Chargeable to NIL rate of tax.

> In terms of Si. No. 102 of Notification No. 02/2017-CT(Rate) dated 28-06­2017, the applicant is claiming exemption on the Thippi/Kappi or Sago pith used as an animal feed.

> Based on the discussions the applicant had during the interactive meeting and sessions with the officers during the introduction of GST. The applicant stated that only as per their guidance the product ‘Tapioca Flour’ is classified under HSN 11062020 and exemption is claimed provided in the above notification.

17. From the above, it can be inferred that the manufacturing process of casava starch by the above manufacturers involves preparation of pure and fine Starch powder out of Manioc(casava) and this process of preparation is also the certified one by the Indian Council of Agricultural Research (ICAR) for preparation of Starch or Sago as detailed in the appeal order. The other process involving manufacture of casava (manioc) flour is not being dealt by the said manufacturers as per the facts submitted by them.

18. To determine whether the claim of the applicant to classify their product under 1106 2020, one has to look into the difference between `casava flour’ and `casava starch’. The preparation and manufacture of both are different and the uses are also different.

19. `Casava flour’ under Tariff heading 1106 is the powdery particles of cassava peeled, crushed and dried, or the coarse powder particles of cassava peeled and dried and crushed. Casava flour is processed coarser, retain the toxicity and cannot be eaten raw due to presence of toxic chemicals which is retained. The processing of casava flour is very simple which involves cleaning, grinding, dehydration, crushing and drying. The casava flour contains protein, fat, and fibre from the entire root. The residue or the by­product we get from this process is only `casava peels’ since the roots are whole grinded. Accordingly, only the product prepared by the above process would rightly be classified under 1106 2020.

20. On the other hand, `casava starch’ is a pure carbohydrate extract without protein, fat or fibre, making it ideal for thickening and providing a smooth, clear texture when cooked. The ‘casava starch’ The method of preparation of casava starch is a tedious one and the milk extracted from casava roots undergo various other process to get a fine, white starch powder used in making sago and for use in the food industry. In addition to using in food industry, it is also used in the pharmaceutical, candy, and paper-making industries as a binder and stabilizer. This casava starch powder is rightly classifiable under 1108 1400 which attracts GST rate of 12%. Sago manufactured from the casava starch is classified under 1903 0000 which attracts GST rate at 5%.

21. The applicant’s product is obtained in the second process of starch manufacture itself by crushing the roods after cleaning and peeling. The residue or waste after crushing, in wet or dry form is supplied to Stage-II manufactures for further processing.

22. As per the above, the product of the applicant is obtained as residue during the preparation of `casava starch’. Therefore, their product can neither be classified as <sup>(</sup>casava flour’ nor as a `casava starch’ as discussed in the preceding paras. In their additional submission, they have admitted clearly that the starch manufactured by the Stage-I manufacture is classified under 1108 @ 12% and the Sago varieties are classifiable under 1903 @ 5%.

23. The applicant contends that it is not residue of starch manufacture as they are of the understanding that the residue is the last and final waste arising out of the said manufacturing process. They further contend that in the process of starch manufacture there is no such residue arises during the process of manufacture. To address their doubt, we have to examine what is a ‘residue’ and what is a. ‘by-product’.

24. As per the dictionary meaning of ‘residue’, “anything that is left over when a substance has been removed, or after a process has been completed”. Here the process done is the crushing of tapioca roots. The aim of this crushing process is to get milk or extract of starch. After the process of crushing, the milk is removed and the leftover is fibrous part of the refuse, which is termed as ‘residue’.

25. The next question to be decided is whether the ‘residue’ is a by-product or waste. One should know the differences for by-product, residue and waste to classify the above product.

26. The term residue is already discussed in the preceding paras. A residue can be a by-product if it has positive value and meets specific conditions, such as being a result of a production process with a definite market or use and being produced as an integral part of that process. If the residue has no value but incurs only disposal cost, it is a waste. In the instant case, the residues emanated from the manufacture of starch is being cleared for a definite value since, it has marketability and further used for making animal feed. Therefore, it shall be classified as a waste. Moreover, Chapter 23 is exclusively for residues used in the manufacture of animal feed in addition to the prepared animal feed. Hence, the classification of the applicant’s product is rightly justified and classifiable under 2303 1000 only.

27. For a stage-I manufacturer, this residue is a wate as their primary objective is to extract starch powder and then make sago. If the Stage-1 manufacturer discards this residue as waste without being reused or has no money value or marketability and incurs only cost of disposal, then the residue shall not be considered as a taxable product. As per the facts submitted by the applicant the Stage-1 manufacturer is clearing the product to the II Stage manufacturer which has a value and marketability.

28. The statute, keeping in mind the usability of similar products, has provided a separate Chapter-23 for “Residues and waste from the food industries; prepared animal fodder”, since the residues arising out of food industry has a marketability and can be used further in the preparation of animal fodder or for use directly as animal feed without any further processing,

29. In the instant case, the residue arising out of crushing of tapioca roots obtained from Stage-I manufacturers by Stage-II manufacturers are dried, fine grind as per the requirements, sieved to separate coarse and fine ground powder before being sold in gunny bags as an animal feed or for preparation of animal fodder through dealers/traders like the applicant.

30. A processing residue is a substance that is not the end product that a production process directly seeks to produce. It is not a primary aim of the production process. Here the ultimate aim of Stage-I manufacturer is to produce edible tapioca/ casava starch as final product. Therefore, the process which the tubers undergo is a ‘starch manufacturing processes. During this manufacturing process, thippi is obtained as a by-product and residue of starch manufacture. This thippi obtained as residue after sieving is subjected rasping, sieving and drying to obtain products of different grade used in the animal feed production.

31. The applicant further stated in the additional submission that the said product was charged to Nil rate of tax during the VAT regime and the facility of exemption from VAT was provided by the State Government before GST. However, with the roll out of GST, GST tariff has not provided any specific classification for the said product and hence the applicant is classifying the product under 1106 2020 to claim exemption from payment of GST.

32. It is pertinent to mention here is that GST was effective from 01-07­2017 and the classification of goods under GST Tariff is adopted from the internationally accepted ‘Harmonised System of Nomenclature’. There are many commodities exempted during Central Excise regime were chargeable to tax under GST regime. Therefore, the applicant cannot expect any such facilities or exemption which is not available their product as per the tariff.

33. It is very clear and there is no doubt that the product manufactured and supplied is obtained from raw manioc or cassava root falling under 0714. However, the claim that their product is rightly classifiable under 1106 shall not be acceptable for the above reasons.

34. The practice being followed in the trade (as per the purchase bill and sale bill submitted) that their product is ‘tapioca flour’ is incorrect, since the `tapioca flour’ and ‘tapioca starch’ are one and the same obtained from the wet starch after drying and powdering which is an edible preparation as well as for use in the food industry for further manufacture of food products.

35. Though, we accept that the applicant is not selling ‘residues of starch’ as such, but are selling it after sieving and drying to segregate based on the quality, content and colour as per the facts furnished by them. In the certified process of manufacture submitted by Stage-I manufacturer, they have stated that in the course of manufacture of starch and sago, by-products such as Thippi is produced, from which tapioca flour is produced. The end tapioca waste is called kappi — which is exclusively used for animal feed. From the facts submitted by the appellant, the by-product known as `Thippi’ is nothing but the residue emanating during the starch manufacture as stated by the appellant himself. Therefore, the product being dealt by the appellant is residues of starch manufacture and are classifiable under 23031000 as `Residues of Starch manufacture and similar residues’ chargeable to 5% GST.

36. In view of the above, the facility of exemption provided in entry No. 78 for the Tariff item 1106 in Notification No. 02/2017-CT (Rate) dated 28-06-2017 shall not be available to the appellant to claim. The applicability of bearing a brand name or put up in unit containers will only come into play if’ the appellant’s product is classified under 1106 under exempted category. Since the product dealt with and supplied by the appellant attracts GST, it is necessary for them to get registered and discharge appropriate tax.

37. In view of the facts and circumstances of the case, and based on the discussions, we pass the following order.

ORDER

(a) Classification of goods i.e. Tapioca flour obtained by crushing the dried roots, and remnants of tapioca roots/tubers.

The product of the applicant namely, ‘Tapioca Flour’ is rightly classifiable under Chapter sub-heading 2303 1000.

(b) Applicability of Notifications issued under the provisions of Act in respect of goods falling under entry No.78 and Tariff item 1106 of Part A of Exempted goods, and tariff item 1106 in Sl. No. 59 of Part C in Schedule I of the said Act.

and

(c) Determination of the liability to pay tax in respect of the said goods, tariff No.1106 as mentioned in Sl.No.78 of Part A of Exempted goods, and Sl.No.59 of Part C of First Schedule to the Act.

As the said product is classified under 2303 1000, the exemption provided under Notification No. 02/2017-CT (Rate) dated 28-06-2017is not applicable to the applicant.

(d) Whether such trader/ dealer is required to be registered.

The applicant, being a trader/dealer of Tapioca Flour’ is required to be registered subject to the conditions prescribed under Section 22 of the GST Ac