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2022 (2) TMI 124 - AAR - GSTClassification of supply - applicable rate of GST - supply of Reverse Osmosis Plant/system (RO Plant/system) to Indian Navy/Indian Coast Guard in normal course - supply of RO Plant/system (Reverse Osmosis Plant) to the Indian Navy/Coast Guard which would be installed in/on a warship. Applicable rate of GST on supply of Reverse Osmosis Plant/system (RO Plant/system) to Indian Navy/Indian Coast Guard in normal course - HELD THAT - The said question is pertaining specifically to supply of the impugned goods. In other words, the issue is a supply of goods only. The applicant is of the opinion that the impugned goods are classified under HSN 8421 of the GST Tariff and we also agree with the said opinion of the applicant - the impugned product classified under C.H. 8421 of the GST Tariff attracts 18% GST. Applicable rate of GST on supply of Reverse Osmosis Plant/system (RO Plant/system) to Indian Navy/Indian Coast Guard to be installed in/on a warship - HELD THAT - The items that are discussed as essential parts of a ship/vessel are such essential components of a vessel/ship without which the ship would not be complete and would not exist. These are very integral for the functioning of the ship and can also be separated from the ship for repair/replacement. When the definition of the word 'part' is referred, it is found that 'part' is a separate piece of something or a piece that combines with other pieces to form the whole of something. Similarly the second definition of part also defines 'part' as one of the pieces that together form a machine or some type of equipment. The classification of goods under Sr. No. 252 depends solely on the nature of use to which the goods are put to. The impugned goods have the function of purifying water. It is not the case that the ship cannot sail without the impugned goods. The applicant has not produced any evidence to show that the impugned goods are so essential that the ships cannot sail without the same - the impugned goods, being in the nature of additional equipment used in ships and not parts of ship cannot be considered for concessional rate of GST as parts of a ship. The fresh water is very essential necessity for the members/crew of the vessels in terms of drinking water, water for cooking, etc. especially when the ship is out for a long haul but such essential necessity of the impugned equipment is for the crew/members and not for the ship as a whole. Any ship can just sail without have the impugned equipment on board and therefore the impugned goods cannot be considered as parts of a ship and therefore, the subject supply of impugned goods cannot be given the benefit of concessional rate of GST as per Sr. No. 252 of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 - in the absence of specific exemption, the applicable rate of GST is 18%.
Issues Involved:
1. Applicable rate of GST on supply of Reverse Osmosis Plant/system (RO Plant/system) to Indian Navy/Indian Coast Guard in normal course. 2. Applicable rate of GST on supply of RO Plant/system to Indian Navy/Coast Guard for installation on a warship. Issue-wise Detailed Analysis: 1. Applicable Rate of GST on Supply of RO Plant/System to Indian Navy/Indian Coast Guard in Normal Course: The applicant, M/s Rochem Separation Systems India Private Limited, sought clarification on the applicable GST rate for supplying RO Plant/system to the Indian Navy/Indian Coast Guard. The applicant classified the RO Plant/system under Chapter Heading 8421 of the GST Tariff, which typically attracts a GST rate of 18%. The relevant Schedule III of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017, which lists goods under Chapter Heading 8421, confirms that these goods attract a GST rate of 18%. The Authority for Advance Ruling (AAR) agreed with the applicant's classification and confirmed that the applicable rate of GST for the supply of RO Plant/system to the Indian Navy/Indian Coast Guard in normal course is 18%. 2. Applicable Rate of GST on Supply of RO Plant/System to Indian Navy/Coast Guard for Installation on a Warship: The second issue addressed whether the supply of RO Plant/system to be installed on a warship qualifies for a reduced GST rate of 5%, as suggested by the Indian Naval Department. The applicant argued that the RO Plant/system should not be considered as a part of the warship, which would otherwise qualify for the concessional rate under Sr. No. 252 of Notification No. 01/2017 dated 28.06.2017. This notification provides a reduced GST rate for parts of goods classified under headings 8901, 8902, 8904, 8905, 8906, and 8907. The AAR examined the definition and common understanding of "parts" and concluded that the RO Plant/system does not constitute an essential part of a warship. Essential parts of a ship include items like the anchor, hull, keel, mast, and rudder, which are integral to the ship's operation and functionality. The RO Plant/system, used for purifying water, is considered an additional equipment rather than a fundamental component necessary for the ship's operation. Therefore, it does not qualify as a part of the warship under Sr. No. 252 of the notification. The AAR also referenced several judicial precedents to support its conclusion that the RO Plant/system, being an additional equipment for the welfare of the crew rather than the ship's functionality, does not meet the criteria for the reduced GST rate. Consequently, the applicable rate of GST for the supply of RO Plant/system to be installed on a warship remains 18%. Order: In conclusion, the AAR ruled that the applicable rate of GST on the supply of Reverse Osmosis Plant/system to the Indian Navy/Indian Coast Guard, whether in normal course or for installation on a warship, is 18%. The applicant's request to withdraw the application was denied as the final hearing had already been conducted, and a detailed order was deemed necessary.
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