RECENT ADVANCE RULINGS IN GST (PART-10)

[Dr. Sanjiv Agarwal]

Advance rulings are important in any tax law as it provides a forum for clarification and possible interpretation of statutory provisions. Moreover, it conveys the legislative intention from the revenue’s view point. Provisions of advance ruling are contained in section 95 to 106 of CGST Act, 2017 and State / UT GST enactment. Rules 103 to 107 of also provide for forms, manner, certification etc.

The Authority for Advance Rulings (AAR) have been set up in all the states and we have now over 200 advance rulings on different issues already pronounced by various State Authorities. The appellate mechanism for filing appeals against AAR rulings is also in place and we have about twenty such appellate orders confirming or modifying the AAR orders. One major issue presently being faced is about multiple authorities (equal to number of States), each pronouncing a ruling of its own even if the matter is covered by some other State AAR’s rulings. There would be situations where we may have different rulings on same question(s) by different AARs. GST Council ought to decide on having a Centralized Authority as was there in erstwhile tax regime. The orders of Appellate Advance Ruling Authority (AAAR) have also started pouring in. The AAAR’s are in the process of being set up in remaining six states.

The summary of few more recent advance rulings pronounced by State Advance Ruling Authorities are discussed hereunder but these needs to be read in the background of the question involved:

Advance Ruling on classification of goods and rate of tax

• Where the assessee manufactures and supplies the ‘Ice-cream Making Machines’ in diverse specifications such as Automatic Ice Cream Making Machine, Countertop Ice Cream Making Machine, Soft Ice Cream Making Machine and Fully Automatic Ice Cream Making Machine. The assessee made an application before the Authority for Advance Ruling and sought ruling on whether the said goods fall under Chapter Heading 8438 of Tariff and whether GST shall be applicable @18%.

The Authority for Advance Ruling ruled that 'Ice cream making machine' is classifiable under Tariff heading 84.18 of Customs Tariff Act, 1975 instead of 8438 and GST rate applicable to said product at the rate 28% [Mitora Machinex (P.) Ltd., In re  (2018) 6 TMI 624 (AAR,Gujarat); ]

• The assessee made an application before the Authority for Advance Ruling and sought ruling on the following issues :

• Whether Tariff Heading 8535 covers products 'Electrical apparatus for switching or protecting electrical circuits or for making connections to or in electrical circuits for a voltage exceeding 1,000 volts and product Lighting Arrester is specifically covered under Tariff Heading 8535
• Whether Earthing Pipe specifically processed to make solely and principally for lightning arrester system and placed below ground level and connected with Lighting Arrester System and is classifiable under Tariff heading 8538
• Whether Solid Rod Earthing which are machined at both ends for easy fitting covered under Tariff Heading 7215 of 'Other bars and rods of iron or non-alloy steel’
• Whether Back Fill Compound prepared by mixing Bentonite Powder, Wood Charcoal Powder and Graphite Powder is classifiable under Tariff Heading 3824
• Whether service of installation of Earthing System is classifiable under Service Accounting Code 9954

The Authority for Advance Ruling ruled that:

1. The product 'Lightning Arrester' is classifiable under Tariff Heading 8535.
2. The product 'Earthing Pipe' is classifiable under Tariff Heading 8538.
3. The product 'Solid Rod Earthing' is classifiable under Tariff Heading 7215.
4. The product 'Back Fill Compound' is classifiable under Tariff Heading 3824.
5. The service of installation of Earthing System is classifiable under Service Accounting Code 995

[ IN RE : M/S. RAPID ELECTRODES PVT. LTD.  2018 (6) TMI 703 - AUTHORITY FOR ADVANCE RULING, GUJARAT ]

• Where the assessee made an application before the Authority for Advance Ruling and sought ruling on whether roof ventilators are classifiable as air or vacuum pumps under heading 8414 of Customs Tariff as adopted by GST.

As per the Rules for Interpretation of Customs tariff as made applicable to GST Tariff and General rules for Interpretation of the schedule, classification of Goods shall be governed by certain principles laid down therein. As per these general rules for interpretation, the heading which provides the most specific description shall be preferred to headings providing a more general description.

The primary function of these Roof ventilators is to provide ventilation by continuous extraction of air from the building. Even in trade parlance these goods are identified as Roof ventilators only and not as Windmills as contested by the applicant. Hence, in accordance with the general rules for interpretation, these Roof ventilators are correctly classifiable under the heading 8414 of the Customs tariff as adopted by GST.

Thus, the Authority for Advance Ruling ruled that  Roof Ventilators falls under Schedule-III of Notification No. 1/2017 – Central Tax (Rate) to GST Act, 2017 as amended and attracts a tax rate of 18% (CGST 9% + TGST 9%) w.e.f. 15-11-2017.

[Sammarth Overseas & Credits (P.) Ltd. In re  (2018) 6 TMI 427 (AAR, Telangana); ].

• Where the assessee made an application before Authority for advance ruling and sought on whether the disc brake pads & brake shoes manufactured by the applicant deserve classification under Chapter 6813 (Friction material and articles thereof) or under Chapter 8708 of the GST Tariff (which deals with parts and accessories of the motor vehicle).

It was ruled that since the good in question are classifiable under Chapter Heading 8708, accordingly applicant is liable to pay GST applicable under the said Chapter Head which is 28% as on date.

[Indo German Brakes (P.) Ltd, In re (2018) 6 TMI 369 (AAR, Uttarakhand); ]

Advance Ruling on activities relating to agricultural produce

Where the assessee is engaged into the activities of cleaning of the various Agriculture produce like saunf (fennel), dhaniya (coriander), Jeera (cumin seeds), etc. or the like goods which are brought to them by the farmers or by the traders. Such agricultural produce contains dust particles, certain small pieces of stones, dust, mud and other impurities etc. The applicant is having cleaning plant and they remove the various impurities but do not change the essential character of the agriculture produce but make the product marketable for primary market.

The assessee made an application before Authority of Advance Ruling and sought ruling on whether the activity of cleaning agricultural produce such a saunf, dhaniya (Coriander), jeera (cumin seeds), etc. by removing impurities like dust particles, stones, etc. carried in cleaning plant shall be fully exempt from GST under Notification Nos. 11/2017-C.T. (Rate) and 12/2017- C.T. (Rate), both dated 28-6-2017.

The Authority for Advance Ruling ruled that condition for its availability of exemption on agricultural cleaning services under Serial No. 24(i)(i)(c) of Notification No. 11/2017-C.T. (Rate) and Serial Nos. 54(c) of Notification No. 12/2017-C.T. (Rate) is available only if cleaning activity undertaken in agricultural farm and such activity does not alter essential characteristics of agricultural produce and make it marketable only at primary market and activity undertaken beyond stage of primary market would take it out from ambit of Notifications Nos. 11/2017-C.T. (Rate) and 12/2017-C.T. (Rate). Thus, the assessee is not covered by Entry S. No. 24(i)(i)(c) or S. No. 24(i)(iii) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 and Entry S. No. 54(c) or Entry No. 55 of Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 & will not attract NIL rate of tax.

[Rara Udhyog, In re,  (2018) 7 TMI 884 (AAR, Rajasthan); ].

(Some more to follow …..)