2022 (3) TMI 1087 - AAR - GST

Classification of goods - rate of GST - Marine engine - falling under HSN 8402 and 8407 or not - taxable at the rate of 28% or 5%? - applicability of circular No. 52/26/201-GST dated 9-8-18 - HELD THAT - The fishing vessels are classifiable under heading 8902, and attract GST @ 5%, as per S. No. 247 of Schedule-I of the notification No. 1/2017-Central Tax (rate), dated 28-6-2017. Further, parts of goods of heading 8902, falling under any chapter also attracts GST rate of 5%, vide S. No. 252 of Schedule I of the said notification. The Marine engine for fishing vessel falling under Tariff item 8408 1093 of the Customs Tariff Act, 1975 would attract a GST rate of 5% by virtue of S. No. 252 of Schedule-I of the notification No. 1/2017-Central Tax (Rate), dated 28-6-2017.

Summary

Issues:
Determination of GST rate on marine engines supplied to fishermen for fishing purposes.

Analysis:
The applicant, a supplier of marine engines used by fishermen in fishing boats, sought an advance ruling on the applicable GST rate for marine engines falling under HSN 8402 and 8407. The applicant contended that marine engines should be taxed at 5% as per Circular No. 52/26/201-GST dated 9-8-18, which clarifies the GST rate for marine engines used in fishing vessels. During the personal hearing, the applicant emphasized that they only supply marine engines to fishermen who possess the necessary licenses to operate fishing boats, ensuring compliance with regulatory requirements.

The Revenue's submission highlighted that the applicant supplies marine engines exclusively for fishing vessel construction, and these engines are provided to customers holding licenses issued by the Fisheries department of the Government of Gujarat. The Authority for Advance Ruling carefully considered the submissions and noted the due diligence conducted by the applicant in verifying the customers' credentials to operate fishing boats.

Upon examination, the Authority observed that Tariff 8402 pertains to boilers, not marine engines. Referring to CBIC Circular 52/26/2018-GST, it was clarified that marine engines for fishing vessels fall under Tariff item 8408 1093 and attract a GST rate of 5%. The ruling emphasized that the GST rate on marine engines is determinable on a case-to-case basis. If the applicant verifies the customer's possession of a certificate of registry or license for fishing boats, the GST rate is 5%. Otherwise, the standard GST rate of 28% applies to marine engines supplied for non-fishing purposes.

In conclusion, the ruling established that the GST rate on marine engines supplied to fishermen for fishing purposes is contingent on the applicant's adherence to due diligence norms regarding the customers' possession of the requisite licenses for operating fishing boats. Compliance with these norms warrants a reduced GST rate of 5%, while non-compliance results in the standard rate of 28% being applicable.