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2019 (7) TMI 38 - AAR - GSTClassification of goods - Hydraulic Kits - kits were supplied to dealers / distributors or body builders as such from the factory of applicant under CGST Act - HELD THAT - The Hydraulic Kit is specifically excluded by Note 2(e) to Section 17 which provides that the expression parts and parts and accessories do not apply to machines or apparatus of heading 8401 to 8479 or parts thereof, other than radiators or articles of Section 8481 or 8482 or provide constituting integral parts for engines or articles of Heading 8483, whether or not they are identifiable as goods as per the goods of this section. In the present case, the product in question hydraulic cylinders/hydraulic kits is squarely/specifically covered under Heading No.84.12 and hence the condition (a) mentioned above stands not satisfied in the present case. Hydraulic Kit is more specifically included in Heading No.84.12 and is more specifically covered under said heading - all the 3 conditions mentioned in Heading No.8708, 8714 and 8716 are not satisfied in the present case and hence, the product in question i.e. Hydraulic Kit will not be covered under Headings No. 8708, 8714 and 8716. The hydraulic kits are appropriately classifiable under heading 8412 by application of HSN Explanatory Notes to headings 8412, 8708, 8714 and 8716 and Section Note 4 to Section XVI and Exclusion Note 2 to Section XVII.
Issues Involved:
1. Classification of "Hydraulic Kits" supplied to dealers/distributors or bodybuilders. 2. Determination of the applicable GST rate for the "Hydraulic Kits." Detailed Analysis: Issue 1: Classification of "Hydraulic Kits" The applicant, M/s. Hyva India Pvt. Ltd., sought clarification on the appropriate classification of "Hydraulic Kits" under the GST laws. The "Hydraulic Kit" consists of multiple components such as Hydraulic front-end cylinder, Gasket, washers, MTG Kit valves, hose, pipes, Oil tanks, cables, etc., used for mounting on a motor vehicle chassis to lift the body of trucks, tippers, etc. The applicant argued that the "Hydraulic Kit" should fall under Chapter Heading 84.12 of the Customs Tariff, which covers "Hydraulic Power Engines and Motors." The applicant referenced Sl. No. 317 of Schedule III to Notification No. 1/2017-Central Tax (Rate) dated 30.06.2017, which specifies a CGST rate of 9% for goods under this heading. The applicant also noted that the "Hydraulic Kit" is supplied in two modes: to dealers/distributors/body builders and to OEMs. For OEMs, the Hydraulic Kit is supplied along with the body fitted on the chassis received from OEMs, and the resultant product is classified under Chapter Heading No. 87.07, attracting GST at 28%. The applicant contended that the Hydraulic Kit should not be classified under Chapter Heading 87.08, which covers "Parts and accessories of the motor vehicles of headings 87.01 to 87.05," as it is not suitable for use solely or principally with motor vehicles of those headings. Instead, it is more specifically included under Heading No. 84.12. Issue 2: Determination of the Applicable GST Rate The applicant's interpretation of the law and facts led them to believe that the Hydraulic Kits should be classified under Chapter Heading No. 84.12, attracting a CGST rate of 9% as per Sl. No. 317 of Schedule III to Notification No. 1/2017-Central Tax (Rate). The applicant provided various legal precedents and rulings from the United States International Trade Commission to support their classification under Heading No. 84.12. They also referenced Rule 2(a) of the General Interpretative Rules and Circular No. 55/1995-Cus dated 30.5.1995, which state that incomplete or unassembled articles should be classified as complete articles if they have the essential character of the complete article. Authority's Observations and Ruling The Authority for Advance Ruling (AAR) examined the submissions and found that the Hydraulic Kits supplied by the applicant to dealers/distributors or body builders should be classified under Chapter Heading 8412 of the Customs Tariff. This classification is supported by the Explanatory Note to heading 8412 and Note 4 to Section XVI of the HSN, which cover hydraulic systems consisting of a hydraulic power unit, hydraulic cylinders, and the necessary pipes or hoses. The AAR noted that the Hydraulic Kit is not suitable for use solely or principally with motor vehicles of headings 8701 to 8705, and thus does not fall under Chapter Heading 87.08. The Hydraulic Kit is specifically excluded by Note 2(e) to Section XVII, which excludes machines or apparatus of heading 8401 to 8479 from being classified as parts and accessories of motor vehicles. Final Order: The AAR ruled that the Hydraulic Kits are appropriately classifiable as "other engines and motors" under heading 8412. The applicable GST rate would be as specified for this heading in the relevant GST schedule at the time of supply.
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