2020 (5) TMI 580 - AAR - GST

Classification of goods - scooter along with retro-fitment - restriction on input tax credit on purchase of vehicle under HSN 8711 at 28% GST - whether the vehicle classified under heading 8713 or 8711? - HELD THAT - In the instant case, it is an admitted fact that the applicant purchases a vehicle i.e. two-wheeler and also certain additional parts/accessories to retrofit the said vehicle with the said parts/accessories. The word Retrofit as a noun is an act of adding a component or accessory to something that did not have it when manufactured. Therefore, the applicant is adding certain components to the two wheeler by retrofitting the same i.e. an attachment is added to the said two wheeler (motor cycles) to enable it to be driven by the disabled person. This does not change the basic feature of the two wheeler. In the instant case the two-wheeler was neither specially designed or constructed nor altered to change its basic structure, after retrofitment. Explanatory Notes to the Harmonized Commodity Description and Coding System specifies that the heading 8713 excludes Normal vehicles simply adapted for use by disabled persons or a bicycle fitted with a special attachment and pedalled with one foot and Trolley-stretchers. In the instant case the two-wheeler is simply retrofitted with additional components / accessories to enable it for use by disabled persons. Therefore, the impugned retrofitted two-wheeler gets excluded from the heading 8713 - the retro fitted two-wheeler is nothing but a two-wheeler purchased by the applicant under heading 8711 20 19, added with additional components/accessories and hence does not change its basic structure. Therefore, the said retro fitted two-wheeler merits classification under heading 8711 20 19 only. Whether the tax paid on two wheelers and retrofit equipment is available to the applicant as input tax credit or not? - HELD THAT - In the instant case the applicant purchases the two wheelers for further supply of such motor vehicles , though they add certain accessories to retrofit the said vehicle. Thus, the applicant is entitled to avail input tax credit of the tax/es paid on the said motor vehicles and the retrofit equipment as the accessories are utilized for value addition of the said motor vehicle. Thus, the retrofitted vehicle merits classification under heading 8711 20 19 and hence attracts GST @ 28% and applicant is entitled for input tax credit of tax paid on purchase of vehicle i.e. scooter.

Summary

Issues:
Classification of retrofitted two-wheelers for GST billing and input tax credit eligibility.

Analysis:
The applicant sought an advance ruling on whether they can bill retrofitted scooters at 5% GST under HSN 8713 without restricting input tax credit on the purchase of vehicles at 28% GST. The applicant purchases vehicles at 28% GST and retro-fitment fitting at 5%, selling retrofitted vehicles at both rates. Other dealers sell such vehicles at 5% GST on the entire sale value, leading to customer demand for the same. The applicant questioned if they can bill the entire vehicle value at 5% GST under HSN 8713 for differently abled customers and claim ITC on the 28% GST paid for vehicle purchase.

During the personal hearing, the applicant's representative reiterated the facts. The Authority considered the submissions and issues involved, noting the similarity between CGST and KGST Acts. The applicant retrofits two-wheelers with equipment to cater to differently abled individuals, claiming classification under HSN 8713 for 5% GST. The Authority analyzed the relevant provisions and classification criteria under Chapter Heading 8713, determining that the retrofitted two-wheelers did not qualify as carriages for disabled persons under this heading.

The Authority further clarified that retrofitting did not alter the basic structure of the two-wheelers, leading to exclusion from heading 8713. As per the Explanatory Notes, the retrofitted two-wheelers were considered simply adapted vehicles, falling under the original classification of 8711 20 19. Regarding input tax credit eligibility, the Authority referred to Section 17(5) of the CGST Act, allowing credit for motor vehicles purchased for further supply. Therefore, the applicant was deemed eligible for input tax credit on the tax paid for the purchase of scooters at 28% GST.

In conclusion, the ruling stated that the retrofitted vehicles should be classified under heading 8711 20 19, attracting 28% GST, and the applicant was entitled to claim input tax credit on the tax paid for the purchase of the scooter.