2021 (7) TMI 752 - AAAR - GST

Classification of goods - PVC carpet mats manufactured by them - classifiable under Tariff Item 5705.00.49 of CTA or under Tariff Item 3918 as held by the SGST Member? - taxable at a rate of 12% as per entry 146 of Schedule II of N/N. 1/2017-Integrated Tax Rate dated 28/6/2017? - HELD THAT - For the purpose of GST, Classification of goods under any tariff item/sub-heading/heading/chapter shall be done using the General rules of interpretation of the First Schedule of the Customs Tariff Act, 1975 including the Section and Chapter Notes and the General Explanatory Notes to the HSN of the First Schedule of the CTA, 1975. The classification needs to be finalized only after deciding the nature of the material of which the impugned product is made up of. Once the same is found to be textile articles covered as goods of Section XI (Textiles Textiles articles) in terms of the tariff (Section XI), the same gets classifiable under Chapter 57 and if it is found to be made up of plastics covered under Chapter 39 (section VII), the same shall be covered under Tariff Item 3918 - the impugned product under discussion has non-woven material made up of PVC on surface, which is coated/laminated with plastics (PVC), which is not in dispute. Hence, by virtue of said Section 1(h) to Section XI (Textiles and Textile articles), same gets excluded from the scope of being Textile Textile articles under Section XI i.e. Chapters 50-63. There are no identifiable fibres, filaments or yarns in the exposed surface of their product but the web like structure made from 100% PVC, duly laminated/coated with PVC o the bottom. Therefore, the impugned goods do not qualify as textile materials as specified in Not 1 to Chapter 57 - the said Bill of Entry is of no help to the appellant - In the instant case, there is no fabric, woven or non-woven and no textile yarns. There is one PVC web obtained by moulding process which is then impregnated with PVC which acts as its base. Therefore, even in absence of relevant details about the product covered under the cited Bill of Entry, the goods in question cannot be claimed to be similar to that of the goods imported, based upon the explanatory notes to 5705 and the manufacturing process of the goods in question. The impugned goods viz. PVC carpet Mat would fall in the Customs Tariff heading 3918 and applicable rate of GST would be 18%.

Summary

Issues Involved:
1. Classification of PVC carpet mats under the appropriate Tariff Item.
2. Applicable GST rate for PVC carpet mats.

Issue-wise Detailed Analysis:

1. Classification of PVC Carpet Mats:
The primary issue revolves around the classification of PVC carpet mats manufactured by the applicant. The applicant contends that the mats should be classified under Tariff Item 5705.00.49 of the Customs Tariff Act, 1975, which pertains to "Other carpets and other textile floor coverings, whether or not made up," and thus attract a GST rate of 12%. The CGST authority supports this classification. Conversely, the SGST authority argues that the mats fall under HSN 3918, which covers "Floor coverings of plastics," attracting a higher GST rate of 18%.

The manufacturing process involves two stages:
- Stage I: Production of PVC monofilament for non-woven carpet top texture.
- Stage II: Bonding of non-woven carpet top texture with a PVC backing.

The appellant provided detailed descriptions of the materials and processes involved, emphasizing that the exposed surface of the mats consists of textile materials, thus fitting the description under Chapter 57 of the Customs Tariff Act.

However, the judgment notes that the product, despite having a non-woven PVC surface, is excluded from being classified as a textile article under Section XI due to the coating/lamination with plastics. The relevant section and chapter notes, along with HSN explanatory notes, were considered to determine that the product does not qualify as a textile material. Instead, it fits the description under Chapter 39, specifically HSN 3918, which includes combinations of textiles and plastics.

2. Applicable GST Rate for PVC Carpet Mats:
The classification directly impacts the applicable GST rate. If classified under Tariff Item 5705.00.49, the mats would attract a GST rate of 12% as per Entry 146 of Schedule II of Notification No. 1/2017-Integrated Tax (Rate). However, if classified under HSN 3918, the applicable GST rate would be 18% as per Entry No. 104A of Schedule III of Notification No. 43/2017-Integrated Tax (Rate).

The judgment concludes that the PVC carpet mats fall under HSN 3918, thus attracting a GST rate of 18%. This conclusion is based on the interpretation of the manufacturing process and the composition of the product, which aligns more closely with the description of floor coverings of plastics rather than textile floor coverings.

Conclusion:
The Appellate Authority for Advance Ruling in Kerala determined that the PVC carpet mats are classifiable under HSN 3918 as "Floor coverings of plastics." Consequently, the applicable GST rate for these mats is 18% (9% each of CGST and SGST), as per Entry No. 104A of Schedule III of Notification No. 43/2017-Integrated Tax (Rate). This classification and rate apply specifically to the types of PVC floor coverings/carpet/mats manufactured by the applicant as per the submitted manufacturing process and sample.