2021 (1) TMI 333 - AAR - GST

Classification of goods - Narrow woven fabrics manufactured - classifiable under Tariff Heading No. 58063990 or not? - benefit of N/N. 01/2017-Central Tax (Rate) dated 28.06.2017 - HELD THAT - The product in question is manufactured by process of weaving from polyester yarn and its width is not exceeding 30 cm. However, it is not forthcoming from the submission that the product is having selvedges (flat or tubular) on both edges. Since, the product is not provided with a selvedges (flat or tubular) on both edges, it does not meet the definition of narrow woven fabric of being provided with selvages, as elaborated above. Hence, it would not be considered a narrow woven fabric. The said woven fabrics is, therefore, not fall under heading 5806 and to be classified with ordinary woven fabrics. As per the rate schedule, the woven fabric can be classified under many heading depending upon their composition. Thus, the product, narrow woven fabrics made of polyester yarn of a width not exceeding 30 cm but not provided with selvedges (flat or tubular) on both edges, is classifiable under sub-heading No. 5407.10.19 of the Customs Tariff Act, 1975. Applicable rate of tax - HELD THAT - It is to mention that the said product attracts rate of tax of 2.5% CGST 2.5% SGST as applicable under Sr. No. 217 under Schedule I of Notification No.1/2017-Central Tax (Rate) read with the corresponding notification under the Gujarat GST Act in case of Intra-State supply. Likewise, the applicable rate of tax will be 5% IGST under Sr. No. 217 under Schedule I of Notification No.1/2017-Integrated Tax (Rate) dated 28th June, 2017 in case of Inter-State supply. Thus, the product, Narrow Woven Fabrics of Polyester Yarn of a width not exceeding 30 cm but not provided with selvedges (flat or tubular) on both edges manufactured by the applicant is classifiable under Chapter Sub-heading No. 5407.10.19 of the Customs Tariff Act, 1975, attracting rate of GST @ 5%.

Summary

Issues Involved:
1. Classification of "Narrow Woven Fabrics" under the appropriate Tariff Heading.
2. Determination of the applicable GST rate for the classified product.

Issue-Wise Detailed Analysis:

1. Classification of "Narrow Woven Fabrics" under the appropriate Tariff Heading:

The applicant, engaged in manufacturing narrow woven fabrics from polyester yarn with a width not exceeding 30 cm, sought to classify their product under Tariff Heading 58063990. The classification under GST depends on the interpretation of the First Schedule to the Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes to the HSN.

According to Chapter Note 5 of Chapter 58, "narrow woven fabrics" are defined as:
- Woven fabrics of a width not exceeding 30 cm, provided with selvedges on both edges.
- Tubular woven fabrics of a flattened width not exceeding 30 cm.
- Bias binding with folded edges, of a width when unfolded not exceeding 30 cm.

The applicant's product, manufactured from polyester yarn with a width not exceeding 30 cm, was initially classified under Tariff sub-heading 58063990. However, the product did not meet the criteria of having selvedges (flat or tubular) on both edges, a requirement for classification under heading 5806.

Considering the absence of selvedges, the product does not qualify as a "narrow woven fabric" under heading 5806. Instead, it is classified with ordinary woven fabrics. The applicable classification for the applicant's product is under sub-heading 5407.10.19 of the Customs Tariff Act, 1975, which covers "Woven fabrics obtained from high tenacity yarn of nylon or other polyamides or of polyesters."

2. Determination of the applicable GST rate for the classified product:

The applicable GST rate for the classified product under sub-heading 5407.10.19 is determined by referring to Notification No.01/2017-Central Tax (Rate) dated 28.06.2017. The notification specifies the GST rates under various schedules.

For the product classified under sub-heading 5407.10.19, the applicable GST rate is:
- 2.5% CGST + 2.5% SGST for intra-state supply, as per Sr. No. 217 under Schedule I of Notification No.1/2017-Central Tax (Rate).
- 5% IGST for inter-state supply, as per Sr. No. 217 under Schedule I of Notification No.1/2017-Integrated Tax (Rate) dated 28th June, 2017.

Conclusion:

The ruling concluded that the narrow woven fabrics manufactured by the applicant, made of polyester yarn with a width not exceeding 30 cm but not provided with selvedges on both edges, are classifiable under Chapter Sub-heading No.5407.10.19 of the Customs Tariff Act, 1975. The applicable GST rate is 5% (2.5% CGST + 2.5% SGST) for intra-state supply and 5% IGST for inter-state supply.