2019 (2) TMI 192 - AAR - GST

Classification of goods/services - rate of tax - Air dryer complete with final filter for used in breaking system of locomotive supplied to Railway - Held that - On going through HSN code 8421, it is observed that the Air dryers, which is used for removing water vapour from compressed air or to remove the moisture from wet substances has been classified under 8421 ibid. - Further, M/S Trident Pneumatics Pvt. Ltd., Coimbatore is a manufacturer and supplier of Air Dryer (LD2000132) Locomotive Dryer-Il as per the Invoice No. TPPL/3187/1718 dated 27.03.2018 invoiced to the applicant by classifying the said good under Chapter 8421 of the GST Tariff Act 2017 which attracts GST@18% (9% CGST 9% SGST). In the light of the fact, classification of Air Dryer (HSN 8421) has already been finalised at the supplier s end who also happens to be manufacturer of the goods in question i.e. M/s. Trident Pneumatics Pvt. Ltd., Coimbatore, which is evident from the tax invoice, dated 27.03.2018. The same goods without any modification/ processing are being further supplied to the Western Railways by the applicant. Hence it is clear that HSN of goods do not merits any change in classification merely due to the fact that the goods in question are being supplied to the Indian railways.

Summary

Issues: Classification of goods for GST purposes

Detailed Analysis:
1. Submission of the Applicant: The applicant, a trader in Air dryer used by Railways, raised an issue regarding the classification of goods supplied to Railways. The applicant contended that based on the use of the material for railway locomotives, the most appropriate classification should be under chapter 86, specifically heading 86072100 for Air brakes and parts thereof. However, the vendor classified the goods under chapter 84, heading 84213990, as a mechanical appliance.

2. Questions on Advance Ruling: The applicant sought an advance ruling on the tax rate applicable to "Air dryer complete with final filter for use in the braking system of locomotive supplied to Railway," as per the order received from Western Railway.

3. Findings, Analysis & Conclusion: The Advance Ruling Authority examined the definition and usage of Air dryers, noting their application in various industries, including train braking systems. The HSN code 8421 covers machinery for filtering or purifying liquids or gases, which includes Air dryers. The supplier classified the goods under chapter 8421, attracting 18% GST. The Circular No. 30/4/2018 clarified that goods under chapter 86 supplied to Railways attract 5% GST, without refund of unutilized input tax credit. Since the supplier already classified the goods under chapter 8421, the classification remained unchanged, despite being supplied to Railways. Therefore, the ruling confirmed the correct classification under chapter 8421, attracting 18% GST.

4. Legal Reference: The ruling was made in accordance with the provisions of the CGST Act 2017, Section 97(2)(a), and relevant GST Tariff Act 2017 classifications. The applicant was advised on the appeal process available under Section 100 of the CGST Act within 30 days of the ruling.

This detailed analysis of the judgment provides insights into the classification of goods for GST purposes, the application of relevant HSN codes, and the impact of supplier classification on GST rates, ensuring clarity on the tax implications for the goods supplied to Railways.