2019 (10) TMI 1090 - AAR - GST

Classification of goods - rate of tax - components, spares and accessories with HSNs applicable to Tractors, Tillers and other farm equipments - Whether the applicant is right in classifying certain components, spares and accessories with HSNs under reference applicable to Tractors, Tillers and other farm equipments though such goods are sold to them under different HSNs attracting peak rate due to certain constraints? HELD THAT - The applicant is a manufacturer of tractors and tillers and he purchases the said components and parts to be used in the manufacture of the tractors and tillers and their suppliers, who are the manufacturers of such parts which are not specific to tractors and tillers, are charging them the rate applicable to the specific part and not as Tractor or tiller parts - the above commodities, if they are for tractors, would be liable to tax at the rate of 18%, else would be liable to tax at the rate appropriate to the classification of the commodity as per the HSN in the Customs Tariff Act. The N/N. 19/2017 - Central Tax (Rate) dated 18 th August 2017 clearly mentions the products, their HSN Codes and if for tractors are taxed at 9% (CGST) and if not then they are taxed at appropriate rates for the said HSN. The notification reduces the rate of tax based on the usage and it is incumbent upon the supplier of these products to prove that they are for tractors only to take advantage of the said notification. The Rotary tiller is covered under HSN 8432 80 20 and the parts of these tillers are generally covered under 8432 90 90. Section Note 2, to Section XVI, provides at (b) that parts which are suitable for use solely or principally with a particular kind of machine or with a number of machines of the same heading are to be classified with the machines of that kind or in heading or 8538 as appropriate. Further (c) provides that all other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8487 or 8548. The section Notes, are thus very clear that if the tiller parts are of specific use in tillers only then the classification would be 84329090. If the parts do not answer to this then they are liable to classified as Section Note 2(c). Since no specific parts are mentioned, specific ruling cannot be given for this question.

Summary

Issues Involved:
1. Classification of components, spares, and accessories for tractors and tillers.
2. Applicability of GST rates on these parts.
3. Clarification on HSN Codes for specific parts.

Detailed Analysis:

Issue 1: Classification of Components, Spares, and Accessories

Applicant’s Argument:
The applicant, a manufacturer and marketer of tractors and tillers, seeks to classify certain components, spares, and accessories under specific HSN codes applicable to tractors and tillers, which attract a lower GST rate of 12% or 18%. They argue that these parts are exclusively used in their products and should not be taxed at the higher rate of 28% applicable to general automobile parts.

Authority’s Findings:
The Authority noted that the applicant's components are often designed specifically for their tractors and tillers, and suppliers are contractually obligated to sell these parts exclusively to the applicant. These parts are often embossed with the applicant's brand or part numbers, preventing their use in general automobiles. The Authority emphasized that the classification and tax rate depend on the specific use of these parts in tractors and tillers.

Issue 2: Applicability of GST Rates

Applicant’s Argument:
The applicant contends that due to the specific design and exclusive use of these parts in their tractors and tillers, they should be taxed at the lower rates of 12% or 18% as per Notification No. 19/2017. They also argue that the farm sector should not be unduly burdened with higher taxes.

Authority’s Findings:
The Authority referred to Notification No. 19/2017, which prescribes a tax rate of 9% CGST (18% total GST) on specific tractor parts. The Authority clarified that if these parts are exclusively for tractors, they should be taxed at 18% (9% CGST and 9% SGST). The burden of proof lies on the supplier to demonstrate that the parts are indeed for tractors to avail the lower tax rate.

Issue 3: Clarification on HSN Codes

Applicant’s Argument:
The applicant sought clarification on whether parts of tillers sold as spares can be classified under HSN 8432 90 90 and whether specific tractor parts listed in Notification No. 19/2017 should be classified under the specific HSN codes provided in the notification or under a generic HSN list.

Authority’s Findings:
1. Tillers Parts Classification:
- The Authority noted that tiller parts could be classified under HSN 8432 90 90 if they are specifically used in tillers and not excluded by any Section Notes, Chapter Notes, Heading Notes, or Sub-heading Notes in the Customs Tariff Act.

2. Tractor Parts Classification:
- The Authority ruled that parts, components, and accessories of tractors listed in the application, which are exclusively manufactured for the applicant and are embossed with their brand name or part numbers, should be taxed at 9% CGST (18% total GST) as per Notification No. 19/2017, provided they are used exclusively for tractors.

Ruling:

1. Tillers Parts:
- Parts of tillers are classified under HSN Code 8432 90 90 if they are not excluded by any Section Notes, Chapter Notes, Heading Notes, or Sub-heading Notes in the Customs Tariff Act.

2. Tractor Parts:
- Parts, components, and accessories of tractors listed in the application, which are exclusively manufactured for the applicant and embossed with their brand name or part numbers, are taxable at 9% CGST (18% total GST) in terms of Notification No. 19/2017, provided they are for tractors.

This comprehensive analysis ensures that the classification and tax rates for specific parts used in tractors and tillers are in accordance with the relevant GST notifications and the Customs Tariff Act.