2019 (10) TMI 1392 - AAR - GST

Classification of goods - Starter Ring Gear Flywheel Assembly, Starter Ring Gear and Universal join Cross (U.J. Cross) supplied for use in motor vehicle - classifiable under HSN 8708 or 8483 - applicable rate of GST on parts namely Starter Ring Gear Flywheel Assembly, Starter Ring Gear and Universal joint Cross (U.J. Cross) used in motor vehicles - HELD THAT - The heading 8708 covers parts and accessories of motor vehicles of heading 8701 to 8705 and the heading 8483 covers Transmission shafts (including cam shafts and crank shafts) and cranks; bearing housings and plain shaft bearings; gears and gearing; ball or roller screw; gear boxes and other speed changes, including torque converters; flywheels and pulleys, including pulley blocks; clutches and shaft couplings (including universal joints). It is evident from bare reading of heading 8708 and heading 8483 that the product manufactured and supplied by the applicant fall under both the headings - In this regard, it is important to refer to Volume 5 of the Explanatory Notes of World Custom Organization. Explanation to heading 87.08 at point (F) of the said notes provide that parts and accessories of this heading exclude internal parts of engine such as crank shafts, cam shafts and flywheels of heading 84.83. The articles Starter Ring Gear and Universal joint Cross (U.J. Cross) are covered under heading 8708 and not under heading 8483 whereas the article Starter Ring Gear Flywheel Assembly is covered under 8483, taxable at 18%.

Summary

Issues: Classification of goods under GST - Applicable tax rates for motor vehicle parts

Issue 1: Classification of Goods
The applicant, engaged in manufacturing motor vehicle parts, sought an advance ruling on whether their products fall under heading 8708 or 8483 for GST classification. The dispute arose due to different tax rates under Schedule III and IV of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017. The applicant argued that their products like Starter Ring Gear and Universal Joint Cross (U.J. Cross) are used in tractors and four-wheelers, necessitating clarity on the correct classification.

Analysis for Issue 1:
The Authority examined the definitions under heading 8708, covering parts of motor vehicles, and heading 8483, encompassing transmission shafts, gears, and other components. Referring to the Explanatory Notes of the World Customs Organization, it was noted that parts like Starter Ring Gear and Universal Joint Cross (U.J. Cross) align with heading 8708, while the Starter Ring Gear Flywheel Assembly falls under 8483. The classification was determined based on the specific characteristics and intended use of each product, leading to a clear distinction between the two headings.

Issue 2: Applicable Tax Rates
Another question raised was the applicable GST rate, whether 28% or 18%, for the motor vehicle parts in question. The applicant highlighted the amendments in tax rates vide Notification No. 24/2018-Central Tax (Rate), dt. 31-12-2018, impacting the taxation of goods falling under HSN 8708 and 8483.

Analysis for Issue 2:
After careful consideration of the submissions and relevant provisions, the Authority ruled that Starter Ring Gear and Universal Joint Cross (U.J. Cross) are classifiable under heading 8708, attracting a tax rate of 28%. In contrast, the Starter Ring Gear Flywheel Assembly was categorized under 8483, subject to an 18% tax rate. The decision was based on the distinct classifications of the products under different headings and their corresponding tax implications as per the GST notifications.

In conclusion, the Advance Ruling Authority clarified the classification of motor vehicle parts and determined the applicable tax rates based on the specific characteristics and intended use of the products. The ruling provided much-needed clarity on the GST treatment of the goods in question, ensuring compliance with the relevant tax regulations and facilitating informed decision-making for the applicant in their business operations.