Exemption on Cotton seed cattle feed manufactured by mixing cotton seed oil cake and de-oiled cake in GST

The Andhra Pradesh AAR in the matter ofV.K. Industries [AAR No. 06/AP/GST/2025, order dated July 28, 2025] held that a uniform blend of decorticated cotton seed oil cake classified under HSN 23061010 and de-oiled cake under HSN 23061020 sold as "cotton seed cattle feed" does not qualify for GST exemption under Notification No. 02/2017-Central Tax Rate as "Cattle Feed" under HSN 23099010, and must instead be classified under HSN 23061090, attracting GST at 5% (2.5% CGST + 2.5% SGST).​

Facts:

V.K. Industries ('the Applicant') is engaged in processing cotton seeds to manufacture various products, including cotton seed oil cake and de-oiled cake, and now proposes to market a blend as "cotton seed cattle feed."

The Applicant's contention was that the proposed product, a homogeneous blend of cotton seed oil cake and de-oiled cake, is strictly intended for cattle consumption due to the presence of Gossypol (a compound toxic to non-ruminant animals), and thus should be classified as "Cattle Feed" (HSN 23099010), covered by exemption under serial no. 102 of Notification No. 02/2017-Central Tax Rate dated June 28, 2017.

The Applicant approached the Advance Ruling Authority under Section 97(1) of the CGST Act for the below queries.

Issues:

• Whether "cotton seed cattle feed" manufactured by blending decorticated cotton seed oil cake and de-oiled cake in equal proportions is classifiable under HSN 23099010?
• Whether the supply of proposed new product is covered by exemption under serial no 102 of Central Tax Rate vide Notification No. 02/2017 dated June 28, 2017?

Held:

The Andhra Pradesh AAR in AAR No. 06/AP/GST/2025 held as under:

· Observed that, although the product is formulated for cattle and contains Gossypol which limits its use to cattle, it is still a blend of decorticated cotton seed oil cake (expeller variety) and de-oiled cake (solvent-extracted variety), each already classified separately under HSN 23061010 and 23061020 respectively.

· Noted that, per the tariff heading and explanatory notes to Chapter 23 and Customs Tariff Act, such blended cotton seed products remain "residues" from extraction processes and do not lose the essential characteristics of the original material, and thus cannot be classified as "Cattle Feed" under HSN 23099010 for exemption.

· Observed that, cotton seeds are primarily used for oil extraction and are not "vegetables" in common parlance, and the blend does not undergo further processing to change its essential character or composition.

· Noted that, there was an absence of supporting test reports, invoices, or sale documents to demonstrate the product's distinct composition or exclusive application as compounded cattle feed.

· Held that, under serial no. 102 of the Notification No. 02/2017-Central Tax Rate dated June 28, 2017, only products that lose the essential characteristics of the original material or are specifically specified in the notification (e.g., compounded animal feed) qualify for exemption.

· Held that, the product must be classified under HSN 23061090 ("oil cake and other solid residues") and is liable to GST at 5% (2.5% CGST + 2.5% SGST) and that exemption as "Cattle Feed" is not available to this product.

Our Comments:

The AAR's reasoning aligns with the plain reading of the Customs Tariff and Chapter Notes, which emphasize that only those animal feeds which are so processed as to lose the essential characteristics of the original residue qualify under HSN 2309 and simple blends retain their original classification under HSN 2306. This interpretation is supported by the explanatory notes to Chapter 23 and Customs Tariff Act, 1975, clarifying scope for classification.

Whereas the Gujarat High Court in Dharti Industries v. Office of Commissioner (Appeal) & Ors. [R/Special Civil Application No. 19190 of 2023, order dated September 12, 2024] held that cotton seed oil cake intended for cattle feed is exempt under Entry No. 102 of Notification No. 2/2017-Central Tax Rate, regardless of supply being made to traders rather than direct consumption users. The Court reasoned that the exemption persists from VAT to GST regime; the essential character of the cotton seed oil cake as cattle feed remains unaffected by its supply chain route. The Court relied on the Supreme Court's decision in Commissioner of Central Excise v. Gopsons Papers Ltd. [(2015) 17 SCC 176], confirming that the end use by the purchaser controls the taxability, not the nature of the supplier's sale.

Relevant Provisions:

Serial No. 102 of Notification No. 02/2017-Central Tax Rate dated June 28, 2017:

102. "Aquatic feed including shrimp feed and prawn feed, poultry feed, cattle feed, including grass, hay, straw, supplement, husk of pulses, concentrates and additives, wheat bran and de-oiled cake [from specified headings 2302, 2304, 2305, 2306, 2308, 2309] - Nil GST."

Chapter Heading 2306 of the Customs Tariff Act, 1975:

2306: Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable or microbial fats or oils, other than those of heading 2304 or 2305

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