2020 (8) TMI 521 - AAR - GST

Classification of process amounting to manufacture - Tufting or a process other than those processes - whether mentioned in Headings 5701 to 5704 of the Customs Tariff and the HSN Explanatory Notes to Chapter 57? - coir mats / matting / floor covering with Vinyl (PVC) backing manufactured by the process of embedding coir yarn into vinyl (PVC) compound and curing by heating / cooling is rightly covered under the description coir mats, mattings and floor covering - classified under the Heading 5705 (more specifically under CTH 5705 00 49) of Chapter 57 of the 1 Schedule to the Customs Tariff? HELD THAT - The manufacturing of PVC tufted coir mats/ matting/floor coverings is done using technologically advanced machines. The raw materials used for its manufacture are Coir yarn, PVC resin, Dolomite filler, Pigment, etc. The coir as well as PVC, chemicals, fillers etc have equal importance. Hence PVC tufted coir mats/ matting/floor coverings cannot be classified as coir mats and mattings. Coir mats, mattings and floor coverings covered under HSN 5702, 5703 and 5705 are taxable at the rate of 5 % GST as per Sl No. 219 of Schedule I of Notification No.01/2017-CT (Rate) dated 28-06-2017 as amended. This entry covers only the commodities which are manufactured exclusively using coir fibre. If any, PVC or rubber or any other materials are stuffed on the textile of coir, which is used as floor mats or mattings, it will come under Customs Tariff Head 5703 90 90 and is liable to GST at the rate of 12% as per Sl No. 144 of Schedule II of Notification No.01/2017-CT (Rate) dated 28-06-2017 as amended. Manufacture of PVC Tufted Coir Mats / Mattings / Floor coverings by the process of embedding coir yarn into PVC cannot be considered as textile floor coverings of coir covered under HSN 5702, 5703 or 5705. The process undertaken is a tufting process and if any, PVC or rubber or any other materials are tufted on the textile of coir, which is used as floor mats or mattings, it will come under the Customs Tariff Head 5703 90 90 and is liable to GST at the rate of 12% as per Entry at Sl No. 144 of Schedule II of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017 - PVC Tufted Coir Mats and Matting cannot be considered as coir mats, mattings and floor coverings covered under HSN 5702 or 5705 and is appropriately classifiable under HSN 5703 90 90 as tufted mats / matting / floor coverings of coir - The PVC Tufted Coir mats/ mattings / floor coverings are classifiable under Customs Tariff Heading 5703 90 90 and attracts GST at the rate of 12% as per SI No. 144 of Schedule II of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017.

Summary

Issues:
1. Classification of PVC backed coir mats under Customs Tariff headings.
2. Determination of the manufacturing process of PVC tufted coir mats.
3. Appropriate classification and tax rate under GST for PVC tufted coir mats.

Issue 1: Classification of PVC backed coir mats under Customs Tariff headings

The applicant sought clarification on whether their manufacturing process of embedding coir yarn into PVC compound and curing it should be classified as tufting under Heading 5703 or under 5705. The Authority analyzed the process in detail, noting that the manufacturing method aligns with the Explanatory Note to Heading 5705. It was emphasized that the absence of needles/hooks and the nature of the backing material differentiate it from tufted products under 5703. The Authority concluded that the product does not fall under 5703 but is appropriately classified under 5705.

Issue 2: Determination of the manufacturing process of PVC tufted coir mats

The Authority scrutinized the manufacturing process of PVC tufted coir mats, involving advanced machinery and raw materials like coir yarn and PVC resin. It was highlighted that both coir and PVC play significant roles in the manufacturing process, leading to the conclusion that PVC tufted coir mats cannot be classified solely as coir mats. The ruling clarified that if materials like PVC are added to coir textiles, the product falls under Customs Tariff Head 5703 90 90, attracting a 12% GST rate.

Issue 3: Appropriate classification and tax rate under GST for PVC tufted coir mats

Based on the analysis, the Authority issued specific rulings. Firstly, they determined that the process of manufacturing PVC tufted coir mats does not classify them as textile floor coverings of coir under HSN 5702, 5703, or 5705. Instead, it falls under the tufting process and attracts a 12% GST rate under Customs Tariff Head 5703 90 90. Secondly, it was ruled that PVC Tufted Coir Mats should not be considered as coir mats under HSN 5702 or 5705 but appropriately classifiable as tufted mats under HSN 5703 90 90. Lastly, the classification of PVC Tufted Coir mats under Customs Tariff Heading 5705 was rejected, confirming their classification under 5703 90 90 and the corresponding 12% GST rate.

This comprehensive analysis and the subsequent rulings provide clarity on the classification and taxation of PVC tufted coir mats, ensuring adherence to the relevant Customs Tariff headings and GST rates.