2021 (12) TMI 30 - AAR - GST

Classification of goods - sprinkler system, drip irrigation system including laterals, P.V.C. Pipes, other components and accessories - to be classified under HSN 8424 or not - applicable tax rate is 12% or not - applicability of notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 - HELD THAT - In the circular dated 31.12.2018, It has been discussed there under how the said entry 195 B was inserted in the Notification No. 01/2017 from 25.01.2018 and it is specifically mentioned therein that the issue of GST rate on micro irrigation including drip irrigation system, including laterals the GST Council recommended 12% GST rate on micro irrigation system, namely, sprinklers, drip irrigation system, including laterals. Accordingly, the said entry 195B was inserted in the notification No. 1/2017-Central Tax (Rate). Hence, as per the CBIC vide the said circular dated 31.12.2018 has clearly clarified the matter that the term sprinklers , in the said entry 195B, covers sprinkler irrigation system. Sprinklers; drip irrigation system Including laterals; which covers sprinkler irrigation system, falling under Chapter heading /tariff item No. 8424 shall attract GST rate 12% (6% CGST and 6% SGST). Further, laterals/parts used solely or principally with sprinklers or drip Irrigation system, which are classifiable under heading 8424, would attract a GST of 12%, even if supplied separately.

Summary

Issues: Classification and Tax Rate on Sprinkler System, Drip Irrigation System, PVC Pipes, and Accessories under HSN 8424

Classification and Rate of Tax:
The applicant, engaged in manufacturing sprinkler systems, drip irrigation systems, PVC pipes, and accessories, sought clarification on the classification and applicable tax rate under HSN 8424. The applicant believed these products should attract a 12% GST rate under Entry 195B of Notification No. 1/2017. The Department's view was that while sprinklers and drip irrigation systems fall under HSN 8424 at 12% GST, PVC pipes and other components may not be covered under the same entry if supplied separately. The discussion centered on whether the mentioned items classify under HSN 8424 and attract a 12% GST rate as per the relevant notification.

CBIC Circular Clarifications:
The Authority analyzed the relevant CBIC circulars to determine the correct classification and tax rate. Circular No. 81/55/2018-GST clarified that sprinkler systems, including laterals, fall under HSN 8424 at a 12% GST rate. The circular highlighted the evolution of GST rates for micro irrigation systems, emphasizing the inclusion of sprinkler systems under Entry 195B. Subsequent circulars further clarified that parts used solely or principally with sprinklers or drip irrigation systems, classifiable under HSN 8424, would also attract a 12% GST rate, even if supplied separately.

Ruling and Conclusion:
Based on the analysis of the circulars and submissions, the Authority ruled that sprinkler systems, drip irrigation systems, PVC pipes, and accessories classify under HSN 8424 and Entry 195B of the notification, attracting a 12% GST rate (6% CGST and 6% SGST). Additionally, parts used solely or principally with these systems under HSN 8424 would also incur a 12% GST rate, even if supplied separately. The ruling is subject to the provisions of the GST Act until declared void.