2018 (9) TMI 1418 - AAR - GST

Classification of goods/services/both - rate of tax - coverage of various items used in the sprinklers and drip irrigation systems sold individually as well as part of a complete system - N/N. 01/2017 dated 28.06.2017 as inserted vide N/N. 06/2018 dated 25.01.2018 - applicant has contended that along with nozzles later vide notification no. 06/2018 dated 25.01.2018 a new entry was introduced as entry no 195B Sprinklers; drip irrigation system including laterals; mechanical sprayers which included all the lateral parts of these irrigation systems into Schedule II also. Held that - The laterals related only to drip irrigation systems have been covered under this entry and laterals of sprinklers are not covered under the amended entry - Sprinklers is not in itself a complete irrigation system but constitutes an essential component of a Sprinkler Irrigation System which when assembled with other laterals and accessories makes a complete functional sprinkler irrigation system. Risers, adopter, bend, coupler ,end cap, PCN(C-Type), group nipple, reducer bare, socket, Bush, Y(bere), Latch clamps, C clamps, Riser Pipes, Rubber Rings, Tee, Clamps, Foot button, Ripit, Nozzle are all laterals to the sprinklers which when assembled with sprinkler constitutes Sprinkler Irrigation System. In case of drip irrigation system as per entry No.195A and 195 B of the schedule II of Notification No. 1/2017 - CT (Rate) dated 28-6-2017, later amended by Notification No.27/2017 CT- (Rate) dated 22.09.2017 and 6/2018 - CT (Rate) dated 25-1-2018 respectively, covers Nozzles for drip irrigation equipments and drip irrigation system including laterals and would attract GST (CGST 6% SGST 6%) - In case of Sprinklers as per entry No. 195A and 195 B of the schedule II of Notification No. 1/2017 - CT (Rate) dated 28-6-2017, later amended by Notification No. 27/2017 CT- (Rate) dated 22.09.2017 and 6/2018 - CT (Rate) dated 25-1-2018 respectively covers only Nozzles for Sprinkler and Sprinklers which would attract GST 12% (CGST 6% SGST 6%) - Risers ( which connects sprinkler to laterals) along with all other laterals such as adopter, bend, coupler ,end cap, PCN(C-Type), group nipple, reducer bare, socket, Bush, Y(bere) , Latch clamps ,C clamps, Riser Pipes, Rubber Rings, Tee, Clamps, Foot button, Ripit, Nozzle etc. are not covered under entry no. 195A and 195 B. Ruling - As per entry No. 195 B of the schedule II of Notification No. 1/2017 - CT (Rate) dated 28-6-2017, as amended by Notification No. 06/2018 - CT (Rate) dated 25-1-2018, Laterals of sprinklers such as clamps, bends, tee, coupler, bush, foot button, latch, clamp, riser pipe, socket etc. are not covered to attract GST 12% (CGST 6% SGST 6%) but instead will attract GST at 18% (CGST 9% SGST 9%). Laterals of drip irrigation system will attract GST 12% (CGST 6% SGST 6%).

Issues Involved:
1. Classification of goods: Sprinklers and drip irrigation system components.
2. Taxability of various items used in sprinkler and drip irrigation systems.

Issue-wise Detailed Analysis:

1. Classification of Goods:
Submission of the Applicant:
The applicant, engaged in manufacturing and trading plastic and metallic items for agricultural irrigation, sought an advance ruling on the classification of these items under Entry No. 195B of Schedule II of Notification No. 01/2017, as amended by Notification No. 06/2018. The items include Adopter, coupler, Tee, Clamps, Foot button, Ripit, and Nozzle, which are used in sprinkler and drip irrigation systems.

Taxability:
The applicant argued that these items fall under Chapter 84 of the Customs Tariff Act, 1975, specifically under heading 8424, which covers mechanical appliances for projecting, dispersing, or spraying liquids or powders. The applicant contended that these items should be taxed at 12% GST (6% CGST + 6% SGST) as per the amended entries in Notification No. 01/2017.

Personal Hearing:
During the personal hearing, the applicant reiterated their submission and requested a decision based on the application.

Jurisdictional Officer's Comments:
The jurisdictional officer stated that the entry relating to Sprinkler does not include Sprinkler irrigation systems or their laterals, suggesting that the goods in question should attract 12% GST.

2. Findings and Analysis:
Sprinkler:
Defined as a device with small holes used to spray water, ranging from single to multiple nozzles, used for irrigation, firefighting, and powder spraying.

Sprinkler Irrigation System:
A method of applying irrigation water similar to rainfall, consisting of components like a pumping unit, tubings (main/sub-mains and laterals), couplers, sprinkler heads, and other accessories. It was clarified that sprinklers alone do not constitute a complete irrigation system.

Drip Irrigation System:
A micro-irrigation system delivering water directly to the root zone, consisting of components like filters, main lines, submains, laterals, emitters, control valves, and other auxiliary components.

Laterals:
Defined as parts extending to the side, essential for the functioning of irrigation systems.

Conclusion:
The ruling clarified that laterals related to drip irrigation systems are covered under Entry No. 195B, attracting 12% GST. However, laterals of sprinklers are not covered under this entry and will attract 18% GST.

Ruling:
Sprinkler Components:
As per Entry No. 195B of Schedule II of Notification No. 01/2017, as amended by Notification No. 06/2018, laterals of sprinklers such as clamps, bends, tee, coupler, bush, foot button, latch, clamp, riser pipe, socket, etc., are not covered to attract 12% GST but instead will attract 18% GST.

Drip Irrigation Components:
Laterals of drip irrigation systems will attract 12% GST.

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