Finance Ministry has notified changes in the GST system for pencil sharpeners, jaggery and examination institutions, as recommended by GST Council in its meeting on February 18.

A notification dated February 28 says the GST rate on pencil sharpeners will be 12 per cent from March 1. Earlier, it was 18 per cent. This issue became contentious after the Authority for Advance Ruling (AAR) ruling, and various organisations raised the rate hike last year. 

In a ruling, Gujarat AAR said that a pencil sold with a sharpener would attract higher GST than a only a pencil sold alone since the sale of pencil and sharpener together is a ‘mixed supply’. Businesses either supply goods or services alone, or bundle goods and/ or services. The bundled supplies are categorised into two – mixed supply and composite supply. While the former talks about mixed supply refers to the supply of two or more goods and/or supplies together at a single price, and each of them can be supplied separately, composite supply the latter refers to a supply consisting of two or more goods or services or both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, and one of which is a principal supply.

The tax liability in case of mixed supply is fixed on the basis of goods or services with the highest rate. In the case of composite supply, one good or service is taken as a principal supply, and the tax rate for which will apply to that will be for the entire supply. As a sharpener attracted a rate of 18 per cent, the supply of pencil and sharpener together was liable for 18 per cent GST, AAR said, though pencil has a GST rate of 12 per cent. With the latest notification, such supply will attract 12 per cent GST.

GST on jaggery

The notification has also said that “Jaggery of all types including cane jaggery (gur), palmyra jaggery, pre-packaged and labelled; khandsari sugar, pre-packaged and labelled; Rab, pre-packaged and labelled” will attract GST at the rate of 5 per cent. However, if sold loose, GST will be NIL.

GST on testing agencies

In another notification, the Ministry clarified that any authority, board or body set up by the Central Government or State Government, including the National Testing Agency, for the conduct of entrance examinations for admission to educational institutions “shall be treated as educational institution for the limited purpose of providing services by way of conduct of entrance examination for admission to educational institutions.” This means GST exemption available to educational institutions and Central and State educational boards for conduct of entrance examination will also be available to any authority, board or a body set up by the Central Government or State Government, including the National Testing Agency for conduct of entrance examination for admission to educational institutions.