2019 (9) TMI 988 - AAR - GST

Levy of GST or IGST - Marine Duty hydraulic equipment, which is being designed and custom built by us for being fitted on a Barge - Serial No 246 of Schedule. I of GST Notification No 1/2017 dated 28th June 2017 - Input tax credit - indigenous and imported inputs which are being used for manufacture of the above equipment. HELD THAT - The Marine Duty Hydraulic Cylinders and Hydraulic Power Packs will be supplied by them to their client M/s Mandovi Drydocks who will be using the same for the barges being manufactured by them. The barges that will be manufactured will be used for transporting cargo/goods to mid-sea where they would be unloaded/dumped. Hence there is no doubt that such barges would fall under Chapter 8901, as claimed by the applicant. The barge will be carrying materials which will be discharged in mid-sea. Therefore it can be assumed that the barge will be used for transporting materials to be unloaded at mid-sea. We also find that the said products, being tailor made for being fitted only on such barges, cannot be used elsewhere and without the same the barge will not be able to function for the purpose for which it is built, namely for unloading materials in mid-sea. Hence the subject products i.e. Marine Duty Hydraulic Cylinders and Hydraulic Power Packs, can be considered as an integral part of such barge and therefore would fall under Sr. No. 252 of Schedule I of GST Notification No. 1/2017 as Parts of goods of headings 8901. GST @ 5% (CGST of 2.5% and SCGT of 2.5%) or IGST @ 5% under Serial No. 252 of Schedule I of GST Notification No. 1/2017 , will be applicable for the above mentioned Marine Duty hydraulic equipment, which is being designed and custom built for being fitted on a Barge falling under Serial No 246 of Schedule. I of GST Notification No 1/2017 dated 28th June 2017. Input tax credit - indigenous and imported inputs which are being used for manufacture of the above equipment - HELD THAT - Chapter V of the CGST Act, 2017 comprising of Sections 15 to 21, contains provisions pertaining to availment and utilization of Input Tax Credit. Subject to satisfying the provisions of Chapter V, we are of the opinion that the applicant can claim input tax credit in such a situation.

Summary

Issues Involved:

1. Applicability of GST rate for Marine Duty hydraulic equipment.
2. Eligibility to claim input tax credit for the manufacture of said equipment.

Detailed Analysis:

Issue 1: Applicability of GST Rate for Marine Duty Hydraulic Equipment

The applicant sought clarification on whether GST @ 5% (CGST of 2.5% and SGST of 2.5%) or IGST @ 5% is applicable for Marine Duty hydraulic equipment designed and custom-built for fitting on a barge falling under Serial No. 246 of Schedule I of GST Notification No. 1/2017 dated 28th June 2017, and its parts falling under Serial No. 252 of Schedule I of the same notification.

The applicant argued that the hydraulic equipment and parts are essential for the functioning of the barge, which is used for mid-sea cargo discharge. They referenced the classification under HSN Codes 84122100 and 84798999 for Marine Duty Hydraulic Cylinders and Hydraulic Power Packs, respectively, which typically attract 18% GST. However, they contended that since these items are integral to the barge's operation, they should be taxed at 5% GST as per the relevant notification.

The concerned officer raised objections, noting that the function of the barge was not clearly ascertainable and that hydraulic cylinders are used for various purposes in the shipping world. They argued that these items could not be considered essential parts of the barge.

Upon review, the authority concluded that the Marine Duty Hydraulic Cylinders and Hydraulic Power Packs supplied by the applicant to their client for use in barges are integral to the barge's operation. These items are custom-manufactured and cannot be used elsewhere, making them essential parts of the barge. Therefore, the authority ruled that the GST rate applicable is 5% (CGST of 2.5% and SGST of 2.5%) or IGST @ 5% under Serial No. 252 of Schedule I of GST Notification No. 1/2017.

Issue 2: Eligibility to Claim Input Tax Credit

The applicant also sought clarification on whether they can claim input tax credit for indigenous and imported inputs used in manufacturing the above equipment if the GST on the equipment is determined as 5%.

The authority referred to Chapter V of the CGST Act, 2017, which contains provisions for the availment and utilization of Input Tax Credit. The authority confirmed that subject to satisfying the provisions of Chapter V, the applicant is eligible to claim input tax credit for the inputs used in manufacturing the equipment.

Conclusion:

Order:

1. Question 1: The Marine Duty hydraulic equipment designed and custom-built for fitting on a barge falling under Serial No. 246 of Schedule I of GST Notification No. 1/2017, and its parts falling under Serial No. 252 of Schedule I of the same notification, are subject to GST @ 5% (CGST of 2.5% and SGST of 2.5%) or IGST @ 5%.

2. Question 2: The applicant can claim input tax credit in respect of indigenous and imported inputs used for manufacturing the above equipment, provided the GST on the equipment is determined as 5% in terms of Notification No. 1/2017 dated 28th June 2017.

This comprehensive ruling clarifies the GST rate applicable to the specified marine duty hydraulic equipment and affirms the eligibility to claim input tax credit for the inputs used in their manufacture.