The Gujarat Authority for Advance Ruling (AAR) has held that castor oil (non-edible) manufactured by M/s Vinayak Agro Industries, Gandhinagar, is taxable under GST at 5%. However, the authority declined to provide clarity on the refund of accumulated input tax credit (ITC) arising out of the inverted duty structure, citing limitations under the CGST Act.

The bench of Vishal Malani and Sushma Vora has observed that the castor oil [non-edible grade] is obtained/extracted by spraying food grade solvent Hexane. The production process is mentioned in detail supra. Having arrived at a conclusion that the castor oil [non-edible grade] would not fall under either HSNS 1515, 1516, or 1517, the castor oil [non-edible grade] extracted through the said production process, would merit classification under HSN 1518.

The applicant, Vinayak Agro Industries, a partnership firm engaged in the manufacture of castor oil, approached the AAR seeking clarity on the correct classification and GST rate applicable on castor oil (non-edible); and Whether they are eligible for a refund of accumulated ITC due to inverted tax structure.

The firm explained that it extracts castor oil from spent bleaching earth through a solvent extraction process using hexane. The by-product, De-Oil Cake (DOC), is also sold as fertilizer and for industrial use.

The applicant contended that Castor oil should fall under Chapter 15 of the Customs Tariff Act. It should be taxed at 5% under GST. Refunds on ITC in inverted duty situations should be allowed since their input tax rate (18% on hexane and other inputs) is higher than the output tax rate (5% on castor oil).

The applicant also argued that recent Notification No. 9/2022-CT(R) dated 13.07.2022 and Circular No. 181/13/2022-GST dated 10.11.2022, which restrict refunds in some cases, should not apply to them as inputs and outputs fall under different tariff chapters.

After examining the production process and tariff headings (1515, 1516, 1517, 1518), the AAR concluded that Castor oil extracted from spent bleaching earth does not fall under HSN 1515, 1516, or 1517. It is correctly classifiable under HSN 1518. Under Serial No. 90, Schedule I of Notification No. 1/2017-CT (Rate), as amended, the product attracts 5% GST.

On the refund issue, however, the authority refused to comment. It held that Section 97(2) of the CGST Act, 2017, which governs the scope of advance rulings, does not cover refund matters. Similarly, the question of how accumulated ITC should be utilized was also deemed outside the jurisdiction of the AAR.

Ruling Details

Applicant’s Name: M/s. Vinayak Agro Industries

Ruling Date: 12/08/2025

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