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2023 (3) TMI 1248 - AAR - GSTClassification of goods - thermal based fogging machines used for mosquito/health/ pest/ vector control - classified as mechanical sprayers under entry no. 195B of Schedule II of Notification no 1/2017 Central Tax (Rate) dated 28th June 2017 as amended from time to time or under entry no. 325 of schedule III- Mechanical appliances ? - tax rate chargeable to thermal based fogging machine. HELD THAT - In general and technical terms a fogging machine is a mechanical appliance. As a fogging machine convert the liquid inside it in another state of matter before disbursing the same in the form of haze. These vapours are transported via the machine's nozzle and released into the atmosphere. The disinfectant or chemical liquid administered through a fogging machine spreads on both surfaces as well as in air itself. The micro-droplets of disinfectant or chemical solution remain on surfaces for a longer period. The thin tog penetrates smaller and hidden surfaces and even reaches into comers and difficult regions. So, from the process of fogging it can be said that fogging machine are appliances with convert the state of matter from one to another i.e. liquid to gas and not just spray the liquid. From above, it can be concluded that fogging machine are to be classified as mechanical appliances. The thermal based fogging machine are covered under the entry no. 325 of schedule III and taxable at 18%.
Issues Involved:
1. Applicant's eligibility for seeking an advance ruling. 2. Classification of thermal-based fogging machines under GST. 3. Applicable tax rate for thermal-based fogging machines. Detailed Analysis: 1. Applicant's Eligibility for Seeking an Advance Ruling: To file an application before the Authority of Advance Ruling, the applicant must satisfy the conditions prescribed under the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) and Haryana Goods and Services Tax Act, 2017 (HGST Act, 2017). Since both Acts are pari materia, any reference to the CGST Act, 2017 should be construed as a reference to the corresponding provisions in the HGST Act, 2017 as well. Section 97(2) of the CGST Act, 2017 allows for an advance ruling on the applicability of a notification issued under the provisions of this Act. Section 98(2) of the CGST Act, 2017 states that if the questions raised in the application are already pending or decided in any proceedings under any provision of this Act, the application may be rejected after providing an opportunity of being heard. The applicant has undertaken in form ARA-01 that the issue is neither pending nor decided in any proceedings under any provisions of the Act, and the applicable fees have been paid. Therefore, the applicant is eligible to seek an advance ruling, and the case is being heard on merits. 2. Classification of Thermal-Based Fogging Machines Under GST: The applicant is a manufacturer of fogging machines used for mosquito control, health, pest, vector control, and similar applications. The applicant has been charging GST at 18% on their tax invoices, while competitors charge 12%, leading to ambiguity and confusion regarding the correct GST rate. The applicant sought an advance ruling on whether the thermal-based fogging machines could be classified as mechanical sprayers under entry no. 195B of Schedule II or under entry no. 325 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28th June 2017. The original entry of HSN code 8424 under S.no-324 of Schedule III was amended by Notification No. 6/2018-Central Tax (Rate), dated 25 January 2018, which removed mechanical sprayers from this entry and placed them under 195B of Schedule II. The applicant argued that fogging machines are not mechanical sprayers but machines that convert liquid into fog, thus falling under entry no. 325 of Schedule III. During the proceedings, it was observed that fogging machines use thermal energy to convert chemical liquid into fog, which is then dispersed into the affected area. Mechanical sprayers, on the other hand, disburse liquid in its original form without changing its state. The definitions of "mechanical appliance" and "sprayer" were considered, and it was concluded that fogging machines, which convert liquid into gas before dispersing it, are mechanical appliances. 3. Applicable Tax Rate for Thermal-Based Fogging Machines: Based on the classification, the thermal-based fogging machines fall under entry no. 325 of Schedule III, which includes "Mechanical appliances (whether or not hand-operated) for projecting, dispersing or spraying liquids or powders; fire extinguishers, whether or not charged; spray guns and similar appliances; steam or sand blasting machines and similar jet projecting machines (other than sprinklers; drip irrigation systems including laterals; mechanical sprayers; nozzles for drip irrigation equipment or nozzles for sprinklers)." Therefore, the applicable tax rate for thermal-based fogging machines is 18%. Ruling: 1. Classification: The thermal-based fogging machines used for mosquito/health/pest/vector control are classified under entry no. 325 of Schedule III. 2. Tax Rate: The applicable tax rate for thermal-based fogging machines is 18%.
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