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2018 (9) TMI 1035 - AAR - GSTClassification of goods - Marine Diesel Engine - Gear Box - Whether used as Parts of vessels falling under 8901 to 8907 or not? Whether the classification of Marine Diesel Engine falling under TSH 8408 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST 14% SGST) as per Schedule IV (Sr. No. 115) of Notification No. 01/2017 - Central GST (Rate) dated is correct or not? - Held that - Diesel engines are known as compression ignition internal combustion piston engines. Diesel Engine are classified under CTH 8408 and are mainly differentiated as Marine Propulsion Engines, Engines of a kind used for the propulsion of vehicles of Chapter 87 and the third as Other Engines. They can further be classified on the basis of operations viz. 2-stroke, 4-stroke, single acting, double acting and finally, on the basis of Cylinder arrangement namely, horizontal, vertical, radial, etc. DMEs are those engines which are used in marine vehicles namely ships, submarines, etc. Both 2-stroke as well as 4-stroke engines are used in the marine industry. The engines used for the main propulsion or turning the propellers of the normal ships are usually slow speed 2-stroke engines while those used for providing auxiliary power are usually 4-stroke high speed diesel engines. The engine itself is made up of several components such as the crankshaft, bedplate, pistons, liner, etc. - a very specific description and mention of such engines is made under Heading 8408 of the GST Tariff and in view of the same it is very clear that MDEs are classifiable under CH 8408 of the GST Tariff. Under Sr. No. 115 of Schedule IV of Notification No. 1/2017 - Central Tax (Rate) dated 28th June 2017, the tax rate for MDEs is 14% each of CGST and SGST. Whether the classification of Gear Box falling under TSH 8483 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST 14% SGST) as per Schedule IV (Sr. No. 135) of Notification No. 01/2017 - Central (GST (Rate) dated 28.06.2017 is correct or not? - Held that - In view of the fact that a very specific description and mention of such gear boxes is made under Heading 8483 of the GST Tariff, we find that Gear Boxes are classifiable under Heading 8483 of the GST Tariff. Under Sr. No. 135 of Schedule IV of Notification No. 1/2017 - Central Tax (Rate) dated 28th June 2017, the tax rate for Gear Boxes is 14% each of CGST and SGST. Whether the goods falling under TSH 8408, 8409 and 8483 of Customs Tariff Act, 1975 as adopted to GST can be treated as parts of heading of 8902, 8904, 8905, 8906 and 8907 attracting 5% of IGST (2.5% CGST 2.5% SGST) as per Schedule I (Sr. No. 252) of Notification No. 01/2017 - Central GST (Rate) dated 28.06.2017 or not? - Held that - Marine engines and marine gear boxes which are claimed to be supplied by the applicant to dealers and shipyard manufacturers for use in goods falling under heading 8901, 8902, 8904, 8905, 8906 and 8907 will be deemed to be Parts of vessels falling under heading 8901, 8902, 8904, 8905, 8906 and 8907, if they are used in goods covered under Tariff Headings 8901, 8902, 8904, 8905, 8906 and 8907 and are not diverted and used for other purposes somewhere else - We are in agreement with the contention of the applicant that the MDEs and Gear Boxes supplied by them for use in goods falling under heading 8901, 8902, 8904, 8905, 8906 and 8907 will be taxable @ 5% IGST (2.5% CGST and SGST each). - However, the benefit of reduced GST rates would not be available in respect of the Engines and Gear Boxes supplied by the applicant if the same are for use in goods other than goods of heading 8901, 8902, 8904, 8905, 8906 and 8907 of the GST Tariff. Ruling - Classification of Marine Diesel Engine is falling under TSH 8408 of Customs Tariff Act, 1975 as adopted to GST attracting of IGST (14% CGST SGST) as per Schedule IV (Sr. No. 115) of Notification No. 01/2017- Central Tax (Rate) dated 28.06.2017. Classification of Gear Box is falling under TSH 8483 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST 14% SGST) as per Schedule IV (Sr. No. 135) of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017. The goods falling under TSH 8408, 8409 and 8483 of Customs Tariff Act, 1975 as adopted to GST can be treated as parts of heading of 8902, 8904, 8905, 8906 and 8907 attracting 5% of IGST (2.5% CGST 2.5% SGST) as per Schedule I (Sr. No. 252) of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017, subject to these goods, marine Engines and Gear Boxes are used in goods falling under Headings 8901, 8902, 8904, 8905, 8906 and 8907 of the GST Tariff Act, 2017. However if the said goods are used for some other purpose, then the tax rate as applicable to the TSH under GST Tariff would apply.
Issues Involved:
1. Classification of Marine Diesel Engine under TSH 8408. 2. Classification of Gear Box under TSH 8483. 3. Applicability of reduced GST rates for goods under TSH 8408, 8409, and 8483 when used as parts of goods under headings 8902, 8904, 8905, 8906, and 8907. Detailed Analysis: 1. Classification of Marine Diesel Engine under TSH 8408: The applicant, engaged in the assembly and testing of Marine Diesel Engines (MDE) under TSH 8408, sought confirmation on the classification and applicable GST rate. The engines are used in marine vehicles such as ships and submarines. The Authority confirmed that Marine Diesel Engines are classified under Heading 8408 of the GST Tariff as "Compression-ignition internal combustion piston engines (diesel or semi-diesel engines)." The applicable GST rate is 28% (14% CGST + 14% SGST) as per Schedule IV, Sr. No. 115 of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017. 2. Classification of Gear Box under TSH 8483: The applicant also imports and supplies Gear Boxes falling under TSH 8483. The Authority confirmed that Gear Boxes are classified under Heading 8483 of the GST Tariff, which includes "Transmission Shafts, gears and gearing; gear boxes and other speed changers." The applicable GST rate for Gear Boxes is 28% (14% CGST + 14% SGST) as per Schedule IV, Sr. No. 135 of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017. 3. Applicability of Reduced GST Rates for Goods under TSH 8408, 8409, and 8483: The applicant argued that Marine Diesel Engines and Gear Boxes supplied to dealers and shipyard manufacturers for use in goods falling under headings 8902, 8904, 8905, 8906, and 8907 should attract a reduced GST rate of 5% (2.5% CGST + 2.5% SGST) as per Sr. No. 252 of Schedule I of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017. The Authority agreed that if these goods are used as parts of vessels classified under headings 8901, 8902, 8904, 8905, 8906, and 8907, they would indeed attract the reduced GST rate. However, this reduced rate is only applicable if the goods are not diverted for other purposes. Order: 1. The classification of Marine Diesel Engine under TSH 8408 attracting 28% GST is correct. 2. The classification of Gear Box under TSH 8483 attracting 28% GST is correct. 3. Goods under TSH 8408, 8409, and 8483 can be treated as parts of goods under headings 8902, 8904, 8905, 8906, and 8907 attracting 5% GST, provided they are used in goods under these headings. If used otherwise, the standard GST rate for the respective TSH would apply. Conclusion: The Authority for Advance Ruling confirmed the classifications and applicable GST rates for Marine Diesel Engines and Gear Boxes. It also clarified the conditions under which reduced GST rates could be applied when these goods are used as parts of specific marine vessels.
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