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2024 (7) TMI 156 - AAR - GSTInterpretation of statute - expression parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 in Entry No. 252 of Schedule-I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017 and Entry No. 252 of Schedule-I of Notification No. 01/2017 Integrated Tax (Rate) dated 28.06.2017. Whether the goods/ spares used by the applicant are parts of a warships/submarines? HELD THAT - In view of the meanings/definitions of part/parts/Spare Part, as to what are the parts of Goods of CTH 8901,8902,8906 and 8907 and whether the subject goods/spares as mentioned by the applicant listed in Annexures 2A, 2A (i), 2A (ii), 2B,2B (i), 2C, 2D and 2D (i) of this ARA application can be taken to be covered within the meaning of Parts for Sr. No. 252 of notification No. 01/2017 Central Tax (Rate) Dated 28.06.2017 - items like Engines, gearbox, Propeller, Diesel generators, shift generator, Engine driven pumps, shaft generator, etc. are very essential parts of a ship or vsessel and are quite clearly parts of a vessel/ship and a ship cannot be imagined to be in existence without these parts. 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. On refering to the definition of the word 'part as discussed, 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 - the second definition of part also defines 'part' as one of the pieces that together form a machine or some type of equipment. It is pertinent to mention here that serial number 252 of Schedule I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 is applicable only to goods which qualify to be parts of goods of headings 8901, 8902, 8904, 8905, 8906 and 8907. This implies that any goods in the nature of consumables, tools and other materials, which do not answer the specific requirement of being parts of warships, would not fall under the said serial number 252 of Schedule 1 of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. In this instant case, subject to the information furnished and as per contractual agreements made by the applicant the following attract GST @ (SGST 2.5% and CGST 2.5%). In annexure 2A, it is found that except the equipment's mentioned in Sl. Nos. 25, 28, 60, 72, 73, 90, 97, 111, 117, 118, 119, 123, ( Ref annexure 2A (i) ),124 (Ref annexure 2A (ii)), all other equipment's are to considered as an essential part of a warship/submarine without which the ship would not be complete and would not be able to function and accordingly chargeable under Sl. No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. All other annexure items i.e, 2A (i), 2A (ii), 2B, 2B (i), 2C, 2D and 2D (i) are chargeable at the respective rates under respective schedules, but not come under Sl. No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017.
Issues Involved:
1. Classification of various inputs as "parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907" under Entry No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. 2. Applicability of GST rate @ 5% on such inputs. Detailed Analysis: 1. Classification of Inputs as "Parts of Goods of Headings 8901, 8902, 8904, 8905, 8906, 8907": Applicant's Argument: - The applicant, a Government of India Undertaking involved in shipbuilding, contends that various inputs such as equipment, materials, consumables, and tools are essential for manufacturing ships and should be classified as "parts" under Entry No. 252. - They argue that these inputs are critical for making the ship seaworthy and are thus covered under the said entry, attracting GST @ 5%. - The applicant references several legal precedents and definitions to support their claim that these items qualify as "parts" necessary for the ship's functionality. Authority's Findings: - The term "parts" is not defined in the GST law. Therefore, the general understanding and judicial interpretations are considered. - Items like engines, gearboxes, propellers, diesel generators, etc., are deemed essential parts of a ship without which the ship cannot function. - Additional equipment required by statutory compliance (e.g., life jackets, lifeboats) are not considered parts but rather additional equipment. - Items for comfort (e.g., furniture, air-conditioners) are not essential parts. - Consumables and tools, although necessary for shipbuilding, do not qualify as "parts" as per the general understanding and legal definitions. Specific Inputs Analysis: - Annexure 2A: Most items are essential parts except for items listed under Sl. Nos. 25, 28, 60, 72, 73, 90, 97, 111, 117, 118, 119, 123, and 124. - Annexure 2A (i) & 2A (ii): Items listed are not considered essential parts. - Annexure 2B & 2B (i): Materials and general items listed are consumables and not parts. - Annexure 2C: Consumables listed are not considered parts. - Annexure 2D & 2D (i): Tools listed are not considered parts. 2. Applicability of GST Rate @ 5%: Applicant's Argument: - The applicant argues that all inputs used in shipbuilding should attract a reduced GST rate of 5% as they qualify as parts of ships. Authority's Findings: - Only those goods that qualify as parts of goods under headings 8901, 8902, 8904, 8905, 8906, and 8907 will be chargeable @ 5% GST as per Sl. No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. - Items in Annexure 2A, except for specific exclusions, are considered essential parts and attract GST @ 5%. - Items in Annexures 2A (i), 2A (ii), 2B, 2B (i), 2C, 2D, and 2D (i) do not qualify as parts and are chargeable at respective rates under respective schedules. Ruling: Question: Whether the expression "parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907" in Entry No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 will include all the inputs including equipment, material, consumables, tools etc., purchased domestically or imported for use in the manufacture of ships? Answer: Goods that meet the specific requirements of being parts for the classified headings 8901, 8902, 8904, 8905, 8906, and 8907 will be chargeable @ 5% GST as per Sl. No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. Specifically: - Items in Annexure 2A, except for those listed under Sl. Nos. 25, 28, 60, 72, 73, 90, 97, 111, 117, 118, 119, 123, and 124, are considered essential parts and attract GST @ 5%. - Items in Annexures 2A (i), 2A (ii), 2B, 2B (i), 2C, 2D, and 2D (i) are chargeable at respective rates under respective schedules and do not come under Sl. No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017.
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