2018 (10) TMI 682 - AAR - GST

Classification of goods - rate of GST - Reactor used in Hand Pump for water disinfection - Whether the Reactors are more appropriately classifiable under Chapter sub heading No. 8421 21 90 attracting CGST of 9%, SGST of 9% and IGST of 18% or otherwise? Held that - The Reactor manufactured by the applicant is used to purify the water supplied by hand pumps. It may be mentioned here that the main function of a hand pump is to lift water from under the ground and make them available to the public. The hand pump does its work even without the presence of Reactors inside it. Hence it clearly appears that the Reactor is not an essential part of the hand pump - the basic function of the Reactor is purifying the water which is different from the function Of the hand pump which is withdrawal and delivery of water from the underground . The said Reactors are not exclusively used in hand pumps. They are also used with other machinery, and their main function is to purify water - The Reactors as supplied by the applicant, even though claimed as meant to be solely used With and in Hand pumps, their existence would not be as a part of the hand pump, but still this Reactor would have an independent existence as that of a water purifier which can be used in other applications for purification of water - the Reactor does not merit classification under Chapter 8413.91 under the category of Hand Pumps and parts thereof . Reactors are apparatus/ machinery which are used to purify water and as per the submissions made by the applicant, it can be used with various machinery including hand pumps. Hence the arguments of the applicant for considering Reactors as part of Hand Pumps is not tenable and sustainable as Reactors have a use of their own as compared to that of a Hand Pump and thus have an identity of their own - Reactors can also be used in various other places like motorized pipelines, in buildings along with overhead tank, in swimming pools/ fountains, in sewage water treatment in townships, hotels, hospitals, etc. - Reactors have use as water purifier at several places in various pipelines for purification of water and not only in hand pumps. Therefore their claim that their Reactors be treated as parts of hand pumps is not correct. Reactor, in the case of the applicant is nothing but a filtering or purifying machinery/ apparatus for liquids. Apparatus used for filtering or purifying water falls under Heading 8421 21 attracting 9% CGST and SGST each. The Reactor is neither an Ion exchanger plant or apparatus, Household type filter and therefore would fall under the others category i.e. 8421 21 90, thus attracting 9% CGST and SGST each. Ruling - The Reactors are classifiable under Tariff Heading 8421 21 90 of the GST Tariff - GST @ 9% each. Tax @ of 9% CGST and 9% SGST is applicable on the present goods.

Summary

Issues Involved:
1. Classification of goods (i.e., Reactor used in Hand Pump for water disinfection).
2. GST Rate Applicability on reactor machine used in Hand Pump for water disinfection.

Detailed Analysis:

1. Classification of Goods:
The applicant, a manufacturer of Reactors used in Hand Pumps for water disinfection, sought classification under HSN No. 8413, 8413 91 as Hand pumps and parts thereof. The applicant argued that the Reactor, which harnesses fluid dynamics to kill microbes in water, should be classified as part of the hand pump because it forms an integral part of the system.

The concerned officer contended that the classification cannot be based solely on the end use of the product. The officer emphasized the need for details like design, characteristics, and functions to determine the correct classification. The officer also noted that the Reactor, despite being used with hand pumps, has a distinct function of purifying water, which differs from the primary function of a hand pump (i.e., lifting water from underground). Therefore, the Reactor should not be classified under Chapter Heading 8413 but more appropriately under Chapter Heading 8419.

Upon review, the Authority observed that the Reactor is not an essential part of the hand pump since the hand pump can function without it. The Reactor’s primary function is water purification, which is distinct from the hand pump’s function of water withdrawal and delivery. The Authority concluded that the Reactor, having an independent identity and function, should not be classified as a part of the hand pump.

2. GST Rate Applicability:
The applicant proposed that the Reactor should attract the GST rates applicable to hand pumps and their parts. However, the Authority found that the Reactor’s primary function is water purification, which aligns with the description under Tariff Heading 8421.21.90 – "Filtering or purifying machinery and apparatus for liquids."

The Authority referred to the GST Tariff, which lists the following under Heading 8421:
- 8421 21 90: Other filtering or purifying machinery and apparatus for liquids, attracting 9% CGST and 9% SGST.

The Authority concluded that the Reactor used by the applicant in hand pumps for water purification is classifiable under Tariff Heading 8421 21 90 and is liable to GST at the rate of 9% CGST and 9% SGST.

Order:
1. Classification of Goods: The Reactors are classifiable under Tariff Heading 8421 21 90 of the GST Tariff.
2. GST Rate Applicability: The applicable GST rate is 9% CGST and 9% SGST on the Reactor used in Hand Pumps for water disinfection.