2019 (10) TMI 1014 - AAR - GST

Classification of goods - rate of GST - LPG Conversion Kit for Automobiles - HELD THAT - The LPG/CNG conversion kit is an apparatus / part that provides alternate fuel into the internal combustion engines of and hence can be considered as parts of said internal combustion engines, which are parts of motor vehicles. Tariff heading 8407 covers spark-ignition reciprocating or rotary internal combustion piston engines; tariff heading 8408 covers compression-ignition internal combustion piston engines (diesel or semi-diesel engines) and tariff heading 8409 covers parts suitable for use solely or principally with the engines of heading 8407 or 8408. In the instant case the product conversion kit is specific to a particular engine i.e. auto rickshaw (three wheeler). Therefore it could be considered that the impugned kit is a part suitable for use solely or principally with engines of auto rickshaw, which falls under tariff heading 8407 or 8408. Hon ble CESTAT, Chennai in the case of TRANSENERGY LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI 2008 (9) TMI 130 - CESTAT CHENNAI has held that the CNG Conversion Kits providing alternate fuel charging system to internal combustion engines are engine parts and though internal combustion engine are parts of motor vehicles of heading 8708 of the Central Excise Tariff, Heading 8409 ibid is being more specific, the kits are classifiable under heading 8409. Thus, the LPG Conversion Kits are classifiable under HSN 8409 99 90 and the same are covered under serial no.116 of Schedule IV to the Notification No.01/2017 - Central Tax (Rate) dated 28.06.2017 and hence liable to tax at 14% under the CGST Act. 2017 - Similarly the said kits are liable to tax at 14% under the KGST Act 2017 under entry no. 116 of Schedule IV of Notification (01/2017) No. FD 48 CSL 2017 dated 29.06.2017.

Summary

Issues: Classification of LPG Conversion Kit for Automobiles

Analysis:
1. Issue: Application for Advance Ruling under CGST and KGST Acts.
- The Applicant, a Private Limited Company, filed an application seeking advance ruling on the classification of LPG Conversion Kits for Automobiles under Section 97 of the CGST Act, 2017, and Section 97 of the KGST Act, 2017.

2. Issue: Facts related to the LPG Conversion Kit.
- The Applicant is engaged in supplying LPG Conversion Kits for vehicles, which include components like Cylinder, Valves, Pressure Regulators, Hose, etc.
- The kits are designed to convert Petrol and Diesel vehicles to run on LPG or CNG, following the Central Motor Vehicles Rules for approval.

3. Issue: Classification of the LPG Conversion Kit.
- The Applicant argued that since there is no separate HSN code for CNG/LPG conversion kits, they should be classified as part of LPG/CNG cylinders.
- The Authority analyzed the classification based on the Tariff Headings 8407, 8408, and 8409 of the Customs Tariff Act, 1975, which cover internal combustion engines and parts suitable for use with such engines.

4. Issue: Legal Interpretation and Precedents.
- The Authority referred to a judgment by the CESTAT, Chennai, which classified CNG Conversion Kits under Heading 8409 as engine parts.
- Considering the specific use of the LPG Conversion Kit for auto rickshaws, the Authority concluded that the kit falls under Tariff Heading 8409 as parts suitable for engines of auto rickshaws.

5. Issue: Ruling and Tax Implications.
- The Authority ruled that LPG Conversion Kits are classifiable under HSN 8409 99 90 and are liable to tax at 14% under the CGST Act, 2017, and KGST Act, 2017, as per Schedule IV of the respective notifications.
- The classification under Heading 8409 implies that the kits are considered parts suitable for use with specific internal combustion engines, leading to the tax implications as determined.

This comprehensive analysis of the judgment highlights the key issues, legal interpretations, precedents, and the final ruling regarding the classification and tax treatment of LPG Conversion Kits for Automobiles under the relevant GST Acts.