2025 (2) TMI 721 - AAR - GST

Classification and applicable GST rates - A hand-held multitool to replace battery in two-wheeler vehicles - A hand-held multitool for replacing automotive batteries - A hand-held multitool for replacing high-capacity batteries - Whether the classification of the multi-tool under the respective HSN Code with applicable tax rates is ascertainable? Classification and applicable GST rates - A hand-held multitool to replace battery in two-wheeler vehicles - A hand-held multitool for replacing automotive batteries - A hand-held multitool for replacing high-capacity batteries - HELD THAT - The multi-tools in which major component is spanner of different sizes integrated with some other tools viz. screwdriver hex key etc. Further 2 tools also have battery indicator (battery voltage level indicator) which provides real-time information about the condition and performance of batteries. As evident from the images of the tools submitted by the applicant there are four light indicators on the tools indicting battery percentages viz. 25% 50% 75% 100%. It is found that hand-operated spanners are classified under chapter heading 8204. Further screw drivers are classified under chapter heading 8205 and battery indicator (battery voltage level indicator) being an electrical equipment is classified under chapter heading 85. We find that the above tools are hand-operated multi-tools intended to be used for replacing two-wheeler automotive and high capacity batteries having spanners as the major component integrated with battery indicator screwdrivers hex key to provide additional benefits viz. convenience time and effort savings to their users. The integration of battery indicator in these tools provides an additional feature only and does not alter the key functionality of the tools. Accordingly the above tools are classifiable under chapter heading 8204 and attract GST @ 18%. Whether GST under ascertain the nature of the products Classification Multi-tool under of Hand Held respective HSN Code with applicable tax rates on the products comes? - HELD THAT - The question is not clear and beyond the scope of sub-section (2) of the section 97 of the CGST Act 2017 hence not answered. Conclusion - The tools in question are classified under chapter heading 8204 and attract GST @ 18%.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the hand-held multi-tool, which includes an energy storage indicator, falls under Chapter 8204 of the HSN with an applicable GST rate of 18%.
Whether the final products should be classified as machinery tools under the chapter for Industry Machinery Tools with an applicable GST rate of 18%.
Whether the classification of the multi-tool under the respective HSN Code with applicable tax rates is ascertainable.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification under Chapter 8204 with GST Rate of 18%

Relevant legal framework and precedents: Chapter 8204 of the Harmonized System of Nomenclature (HSN) covers hand-operated spanners and wrenches. The GST regime in India assigns an 18% rate to most hand tools under this chapter.
Court's interpretation and reasoning: The Tribunal examined the components of the multi-tools, noting that the primary function of these tools is as hand tools, specifically spanners, integrated with other tools like screwdrivers and hex keys. The inclusion of a battery indicator does not alter the fundamental classification as a hand tool.
Key evidence and findings: The tools in question are primarily composed of spanners and screwdrivers, with the battery indicator being a minor component for additional functionality. The tools are intended for replacing batteries in various vehicles and devices.
Application of law to facts: The primary function of the tools as hand-operated spanners justifies their classification under Chapter 8204, attracting a GST rate of 18%.
Treatment of competing arguments: The applicant argued for a 5% GST rate to facilitate competitive pricing for exports, but the Tribunal found that such economic considerations do not influence HSN classification.
Conclusions: The tools are classified under Chapter 8204, with an 18% GST rate applicable.

Issue 2: Classification as Machinery Tools under Industry Machinery Tools

Relevant legal framework and precedents: The classification under Industry Machinery Tools would require the tools to primarily function as machinery tools rather than hand tools.
Court's interpretation and reasoning: The Tribunal reiterated that the primary function of the tools is as hand tools, not machinery tools, thus confirming their classification under Chapter 8204.
Key evidence and findings: The Tribunal found no evidence to suggest that the tools function primarily as machinery tools.
Application of law to facts: The primary function as hand tools precludes classification as machinery tools.
Conclusions: The tools do not qualify as machinery tools and remain classified under Chapter 8204.

Issue 3: Classification under Respective HSN Code

Relevant legal framework and precedents: The Tribunal noted that the question posed was unclear and beyond the scope of the relevant legal provisions.
Court's interpretation and reasoning: The Tribunal declined to answer the third question, citing its ambiguity and irrelevance to the scope of Section 97(2) of the CGST Act, 2017.
Conclusions: The question was not answered due to its lack of clarity and relevance.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The integration of battery indicator in these tools provides an additional feature only and does not alter the key functionality of the tools."
Core principles established: The classification of a product under the HSN is determined by its primary function, not by additional features or economic considerations such as export competitiveness.
Final determinations on each issue: The tools are classified under Chapter 8204 with an 18% GST rate. The question regarding classification as machinery tools is answered in the negative, and the third question is not addressed due to its ambiguity.

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