RECENT ADVANCE RULINGS IN GST (PART-15)

[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 350 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 thirty five 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.  Even the orders from Appellate Authority for Advance Ruling have also started pouring in and we have over three dozen Appellate Orders from AAAR. There are situations where we may have different rulings on same question(s) by different AARs. GST Council / Cabinet has approved (on 23.01.2019)  to have a Centralized Appellate Authority for Advance Ruling under GST that would decide on cases where there are divergent orders at the State level. The same is yet to be notified.

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

Advance Ruling on classification of goods

The applicant manufactures CI Casting for which it purchases pig iron, scrap, molasses, coal, foundry minerals, sand etc. The applicant melts pig iron and scrap in the cupola furnace fired by coal and add foundry minerals in the same. The melted pig iron is poured into moulding boxes of sand and required shape of cast article is obtained. The applicant manufactures the goods according to the requirement of customers. The cast articles so manufactured are used in various industries. The applicant has submitted that at times, the applicant may not be aware about the actual usage of cast product. The applicant also manufactures bracket and clamp of cast iron, which are used for hanging wash basin, commodes and urinals. The applicant is of the view that though the products manufactured by it are used by building construction industry in hanging wash basin, commodes and urinals etc. the said products manufactured by it are required to be classified under Chapter Heading 7325 or 7308 or 7326 of the HSN.

The applicant submitted that it manufactures article from melting process. The shape of the article is given as per the requirement of the customer. For the purpose, the applicant also manufactures/procures pattern of article which is required to be manufactured. On completion of melting process, rough CI Casting is generated. The applicant does sand blasting on the CI Casting for cleaning purpose and then apply enamel so that the article does not get rusted. Thus, the aforesaid article is nothing but a product of casting industry. The applicant manufactures bracket and clamps of cast iron, which are used by 'building' construction industry for hanging wash basin, commodes, urinals etc. as support structure.

The applicant further submitted that the aforesaid products are used by building construction industry for hanging ceramic articles, but the products themselves are separately classified products under Chapter 7325 or 7326 or 7308 of the Central Excise Tariff. Hence, the applicant submitted that the same requires classification accordingly.

The applicant raised the question on which advance ruling was required on whether the article manufactured by the applicant fall under Chapter Heading 7308, 7325 or 7326 of the HSN or any other heading?

The Central Goods & Services Tax and Central Excise Commissionerate informed that as per Chapter 73 of GST Tariff of India, Articles of Iron or Steel notes, 'cast iron' applies to products obtained by casting in which iron predominated by weight over each of the other elements. It is further informed that the brackets and clamp of cast iron are used for hanging wash basins, commodes and urinals. The pig Iron and scrap are main raw materials and predominated by weight over each of the other elements. In view thereof, it was opined by Commissionerate that the 'brackets and clamp of cast iron' are classifiable under chapter sub-heading 7325 99 10 of GST tariff.

As per Chapter Note 1 of Chapter 73 of the First Schedule of the Customs Tariff Act, 1975, the expression 'cast iron' applies to products obtained by casting in which iron predominates by weight over each of the other elements and which do not comply with the chemical composition of steel as defined in Note 1(d) of chapter 72.

Chapter Heading 7325 covers all cast articles of iron or steel, not elsewhere specified or included. As submitted by the applicant, the brackets and clamps of cast iron manufactured by it are product of casting industry, inasmuch as on the rough CI Casting of the said product, the applicant does sand blasting and apply enamel to protect the product from rusting. The brackets and clamps so manufactured are not machined by the applicant therefore the same cannot be termed to have acquired the essential character as parts of sanitary ware.

In view thereof, it was ruled that the articles (brackets and clamps) manufactured by the applicant fall under Chapter Heading 7325. [In Re: Alka Industries 2018 (7) TMI 74 - AUTHORITY FOR ADVANCE RULINGS, GUJARAT ].

Advance Ruling on classification of goods

The applicant is engaged in the business of generation of power. The applicant's power plant is divided into four units. JSL is engaged in the manufacture and supply of steel. JSL requires power on a continuous and dedicated basis, for manufacturing steel at its steel plant. For the said purpose, JSL and JEL proposed to enter into a Job Work Agreement pertaining to Unit III and Unit IV of the power plant which are in the nature of a captive power plant.

The applicant JEL sought an advance ruling in respect of the applicability of GST on supply of coal or any other inputs on a job work basis by JSL to JEL; supply of power by JEL to JSL and job work charges payable to JEL by JSL.

The Authority for Advance Ruling ruled that GST was applicable on supply of power by JEL to JSL. The transaction between JEL and JSL is a transaction of supply of goods and not a 'job work'. [In Re: JSW Energy Ltd. 2018 (5) TMI 763 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA ;]

Advance Ruling on classification of goods and rate of tax

The applicant was engaged in trading of 'dried tobacco leaves' which would be purchased from registered dealer, who in return purchased such tobacco leaves from Agriculturist/Farmers. The assessee after cleaning and removal of unwanted particles (Bhusa, Dust, etc.) will further sell such 'dried tobacco leaves' in wholesale market. During the activity of cleaning and removal of unwanted particles, no essence or foreign particle will be added to the 'dried tobacco leaves'. Such 'dried tobacco leaves' will be sold in wholesale market without any branding on it. Such 'dried tobacco leaves' are not fit for direct human consumption in any way.

The applicant made an application before the Authority for Advance Ruling seeking ruling on the following questions:

1. Whether such 'dried tobacco leaves' would be classified under Heading No. 2401 of HSN or the same would be classified in Heading No. 2403 of HSN or in any other Heading of HSN.
2. Further if the same were classified under Heading No. 2401, whether the same would be covered in Serial No. 109 of Schedule-I of Notification No. 1/2017 - Central Tax (Rate), dated 28-6-2017 being 'tobacco leaves' or the same would be covered under Serial No. 13 of Schedule-IV of the said Notification which covered 'un-manufactured tobacco and tobacco refuse (other than tobacco leaves)'.

The Authority for Advance Ruling ruled that the 'Dried Tobacco Leaves' which have undergone the process of curing after harvesting of tobacco leaves are 'unmanufactured tobacco' covered in HSN Code 2401. However, they are not covered under S. No. 109 of Schedule-1 of Notification No. 1/2017- Central Tax (Rate) dated 28.06.2017 @ 2.5% (CGST) + 2.5% (SGST) or 5% (IGST), but the same are covered under S. No. 13 of Schedule- IV of the said Notification as 'unmanufactured Tobacco (Other than Tobacco Leaves)' @ 14% (CGST) + 14% (SGST) or 28% (IGST). [ In Re: Shalesh Kumar Singh  2018 (5) TMI 529 - AUTHORITY FOR ADVANCE RULING - DELHI ; ].

Advance Ruling on classification of services-Rental or leasing

The applicant company is a cargo handling company operating at Kandla Port Trust under stevedoring license issued by Kandla Port and provide cargo handling service which consists of loading/unloading, providing space for storage and its further forwarding as per direction of importer/exporter.

The applicant submitted that they do not have their own warehouse/godown space and have occupied the same from Government/Private parties. As a part of their services, they provide service of warehouse/space on rent to their customers, where they store imported agricultural commodities.

The applicant sought on advance ruling on the applicability of GST for invoices raised to their clients for storage charges for storing their imported agri product in godowns at Gandhidham after custom clearance from port & shifted at Gandhidham for storage in their godown at distance of 10/12 Kilometres from Port.

The Authority for Advance Ruling ruled that the service provided by the applicant is classifiable as 'Rental or leasing services involving own or leased non-residential property' leviable to Goods and Services Tax @ 18%.[In Re: Rishi Shipping 2018 (6) TMI 1195 - AUTHORITY FOR ADVANCE RULING - GUJARAT ;].

 (Some more to follow …..)