2021 (6) TMI 386 - AAR - GST

Classification of machinery - supply of Automatic Feeder with Breaker, Pre-washer Machine, Drying Machine, Cleaning and Grading Machine, Pre-stem remover, Riffle Washer, Stem Remover, Spin Dryer, Automatic Weighing Machine - classifiable under HSN code 8437 or 8433? - HELD THAT - In the present context, it's observed that the activities carried on by the applicant involves cleaning, grading, drying and packing of agricultural produces i.e. Raisins and Grapes, which are fruits. Machineries for cleaning, sorting or grading of eggs, fruits or other agricultural produce are covered under HSN 8433 60. All the machines are used for this purpose and hence this is a more specific entry. But in the Description of HSN 8433 clearly says what is covered under HSN 8437 are not covered under HSN 8433 - HSN 8437 deals with machines for sorting, cleaning or grading seed, grain or pulses and the machineries used in the milling industry or machineries used for working of cereals or pulses. Evidently this machinery is for used in cleaning, sorting and grading of raisins and hence not cereals or pulses and hence cannot be covered under HSN 8437. Hence these machineries get squarely covered under HSN 8433 60. The rate of CGST applicable for the supply of these goods is at 6%. Further, there is no specific notification for exemption or reduction of rate of tax in case such machineries are sold to farmers or farmer co-operatives. The applicant has also not brought out any reasons in support of reduced tax rate in this regard - Hence the automatic weighing machine is covered under HSN 8423. The machineries manufactured and sold by the applicant like Automatic Feeder with Breaker, Drying machine, Cleaning and Grading Machine, and Pre-stem remover are taxable at 6% under the CGST Act, 2017 and 6% under the KGST Act, 2016 - The Automatic Weighing Machine manufactured and sold by the applicant is liable to tax at 9% under the CGST Act, 2017 and 9% under the KGST Act, 2017.

Summary

Issues:
Classification of machineries for tax rate determination under the CGST Act, 2017 and the KGST Act, 2017.

Analysis:
The applicant, a partnership firm manufacturing various machines for agricultural processing, sought an advance ruling on the GST applicability for their products sold to farmers. The machines included Automatic Feeder with Breaker, Drying Machine, Cleaning and Grading Machine, Pre-stem remover, and Automatic Weighing Machine used in the processing of raisins and grapes. The main issue was the classification of these machines for tax rate determination.

The Authority for Advance Ruling examined the nature of the machines and the relevant HSN codes. The applicant's activities involved cleaning, grading, drying, and packing of agricultural produce, specifically raisins and grapes. The machines were found to fall under HSN code 8433, which covers machinery for cleaning, sorting, or grading eggs, fruits, or other agricultural produce. This classification was deemed more specific than HSN code 8437, which deals with machinery for seed, grain, or pulses, not applicable to the applicant's products.

Considering the above classification, the ruling determined the applicable tax rates. The machineries such as Automatic Feeder with Breaker, Drying machine, Cleaning and Grading Machine, and Pre-stem remover were classified under HSN 8433 and taxed at 6% under both the CGST Act, 2017 and the KGST Act, 2017. On the other hand, the Automatic Weighing Machine was classified under HSN 8423 and taxed at 9% under both Acts.

The ruling emphasized that there were no specific exemptions or reduced tax rates for these machineries when sold to farmers or cooperatives. The decision was based on a detailed analysis of the nature of the machines, their usage in agricultural processing, and the corresponding HSN classifications under the GST Acts.

This comprehensive ruling clarified the tax implications for the applicant's machineries used in agricultural processing, providing a clear understanding of the applicable rates under the CGST Act, 2017 and the KGST Act, 2017.