2018 (6) TMI 369 - AAR - GST

Classification of goods - rate of applicable GST - Disc Brake Pads & Brakes Shoes being used in automobiles - 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)? Held that - Since mineral substances are not the principal or fundamental substance of Disc Brake Pads and Shoes and, therefore, do not warrant classification under subheading 6813 - The Disc Brake Pads and Shoes are not excluded by Chapter 87, and are dedicated and used as parts of motor vehicles of headings 8701 to 8705. Moreover, the said items are not more specifically provided for elsewhere in the GST Tariff. For the purposes of classification under Chapter Heading 87.08, the test to be applied is whether the goods are suitable for use solely or primarily with, articles of Chapter Heading Nos. 8701 to 8705; if the answer is in the affirmative, the goods will be classifiable under Chapter Heading 8708. Having regard to the finding that the goods in question cannot but be regarded as parts of automobiles, it has to be held that they are suitable for use primarily with articles of Chapter Heading Nos. 8701 to 8705. It follows that the goods in question cannot be treated as falling under Chapter Heading No. 6318 and that they can properly be classified under Chapter Heading No. 8708 of the GST Tariff 2017 - Further, v 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. Ruling - Disc Brake Pads and Shoes are required to be classified under subheading 8708 of GST Tariff, as other parts and accessories of the motor vehicles of headings 8701 to 8705 - applicable rate of GST is 28% as on date.

Issues Involved:
1. Classification of "Disc Brake Pads & Brake Shoes" used in automobiles.
2. Rate of applicable GST on "Disc Brake Pads & Brake Shoes".

Detailed Analysis:

1. Classification of "Disc Brake Pads & Brake Shoes":

Applicant's Submission:
The applicant, M/s Indo German Brakes (P) Ltd, sought an advance ruling on the classification of "Disc Brake Pads & Brake Shoes" under GST. They argued that these products should be classified under Chapter 6813 if the friction material is not mounted. However, they noted that their products are bonded on a metal plate, making them ineligible for classification under HSN 6813.

Conflicting Reports:
The Deputy Commissioner-II, SGST, Dehradun, suggested classification under Chapter 6813. In contrast, the Assistant Commissioner, CGST, Dehradun, recommended Chapter Head 8708.

Authority's Findings:
The Authority examined whether the products should be classified under Chapter 6813 (Friction material and articles thereof) or Chapter 8708 (Parts and accessories of motor vehicles). They noted that Chapter 6813 covers friction materials not mounted, whereas Chapter 8708 includes parts and accessories of motor vehicles.

Analysis of Materials Used:
The materials used by the applicant include Kevlar, Mineral Fibre, Cellulose, Phenolic Resin, Steel Wool, Metal Fibre, Graphite, and Barium Sulphate. The Authority observed that mineral substances are not the principal or fundamental substances in the products, thus not warranting classification under subheading 6813.

Chapter 8708 Conditions:
The Authority noted that Chapter 8708 covers parts and accessories that:
- Are identifiable as suitable for use solely or principally with motor vehicles.
- Are not excluded by the provisions of Notes to Chapter 87.
- Are not more specifically included elsewhere in the nomenclature.

Commercial Identity Test:
The Authority emphasized the commercial identity test, stating that the products are known in the market as parts of motor vehicles, not as friction materials. They concluded that the products are suitable for use solely or primarily with motor vehicles, thus classifiable under Chapter 8708.

Manufacturing Process:
The Authority detailed the manufacturing process, noting that the products are designed for specific vehicle models and marketed accordingly. They observed that the products are meant for the replacement market and are supplied to renowned brands like "Bosch India Ltd."

Conclusion on Classification:
Based on the analysis, the Authority held that "Disc Brake Pads & Brake Shoes" are appropriately classifiable under subheading 8708 of the GST Tariff as parts and accessories of motor vehicles.

2. Rate of Applicable GST:

Applicable Rate:
Since the products are classified under Chapter Heading 8708, the applicable GST rate is 28%.

Final Ruling:
The Authority ruled that "Disc Brake Pads & Brake Shoes" are to be classified under subheading 8708 of the GST Tariff, with an applicable GST rate of 28%.

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