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2019 (10) TMI 274 - AAR - GSTClassification of Supply - composite supply - principal supply - rate of GST - supply of desktops consisting of CPU, monitor, Keyboard and mouse or any combination of input/output unit - whether the CPU along with the Monitor or other input /output units supplied by the applicant is a single supply of Desktop Computer classifiable under CTH 8471 50 or is a Composite Supply as defined under Section 2(30) of the CGST /TNGST Act 2017, the Principal supply being the CPU classifiable under CTH 8471 and the applicable rate of GST on such supply? HELD THAT - In terms of explanation (iii) and (iv) contained in the notification no. 1/2017-C.T.(Rate), dated 28.06.2017, Tariff item , sub-heading , heading and Chapter shall mean respectively a tariff item, sub-heading and Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification - the Automatic Data Processor machine with Input/ Output Units are listed under CTH 8471 while monitors capable of directly connecting to and designed for use with ADP is specified under CTH 8528. Section Note 4 to Section XVI indicates that where a machine consists of individual components, intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. In the instant case in the tax invoice submitted by the applicant the product description is given as Desktop Computer which in common parlance and technical sense known as a system unit which is otherwise known as a central processing unit along with its connected peripheral units of input output devices. In this case the processing unit gives essential character to the product in question. Hence, the desktop consisting of CPU, monitor, Keyboard and mouse supplied by the applicant is a single supply classified under CTH 8471. The applicable rate of tax for CTH 8471 is 9%-CGST under SI.No. 360 of Schedule-Ill of Notification No. 01/2017-C.T. (Rate) dated 28.06.2017 9% -SGST under SI.No. 360 of Schedule-Ill of Notification No.II (2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended.
Issues Involved:
1. Classification of desktops consisting of CPU, monitor, keyboard, and mouse. 2. Determination of the applicable GST rate for the supply of desktops. Issue-Wise Detailed Analysis: 1. Classification of Desktops Consisting of CPU, Monitor, Keyboard, and Mouse: The applicant, engaged in the import and sale of IT products, sought to determine the classification of desktops comprising CPU, monitor, keyboard, and mouse. The applicant argued that these components together constitute a single supply of a desktop computer, classifiable under HSN 8471. They referenced various legal precedents and the Customs Tariff Act, 1962, which classifies desktops under CTH 8471. The applicant emphasized that under the GST regime, the description of goods follows the customs tariff heading, and hence, desktops should be classified under CTH 8471 50. The applicant provided detailed explanations, including the common parlance understanding of a "desktop," which includes a CPU, monitor, keyboard, and mouse. They argued that these components are interconnected and essential for the effective functioning of a desktop computer. The applicant also mentioned that the manner of issuance of purchase orders, shipment, and marketing supports the classification of these components as a single supply. The authority examined the relevant section and chapter notes of the Customs Tariff Act, 1975, and found that CTH 8471 covers "Automatic Data Processing Machines" consisting of at least a CPU, keyboard, and visual display. The authority concluded that desktops supplied by the applicant, including the CPU, monitor, keyboard, and mouse, are classified under CTH 8471 as a single supply. 2. Determination of the Applicable GST Rate for the Supply of Desktops: The applicant contended that the supply of desktops should be taxed at 18% GST, as per Sl.No. 360 of Schedule-III of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. They argued that even if the supply is not considered as a single supply, it would qualify as a "composite supply" with the CPU being the principal supply, thereby attracting the same GST rate. The authority reviewed the rate schedules and confirmed that CTH 8471 is specified at Sl.No. 360 of Schedule-III of Notification No. 01/2017-C.T. (Rate), which prescribes a GST rate of 9% CGST and 9% SGST. The authority ruled that the applicable rate of GST for desktops consisting of CPU, monitor, keyboard, and mouse, classified under CTH 8471, is 9% CGST and 9% SGST if all units are supplied together in a single supply. Ruling: The rate of GST applicable on the supply of desktops consisting of CPU, monitor, keyboard, and mouse, classifiable under CTH 8471, is taxable at 9% CGST as per Notification No. 01/2017-C.T. (Rate) dated 28.06.2017 and 9% SGST under Notification No.II (2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017, provided all units are supplied together in a single supply.
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