2021 (12) TMI 322 - AAR - GST

Classification of supply - rate of GST - supply of marine engines of heading 8407 and heading 8408 and/or their spare parts of heading 8409 - general tax rate as per the entry of schedule I, Sl. No. 252 of Notification No. 12017-Central Tax (Rate), Dated 28-06-2017 - whether the said marine engine and parts which are used on a fishing vessel are forming parts of the said vessels and therefore chargeable to tax @ 5% under Sr.No.252 of Notification No.1/2017 Central Tax? - HELD THAT - The parts of goods of headings 8901, 8902. 8904 to 8907 are chargeable to CGST/SGST @ of 2.5% each - in the subject case, the marine engine and parts thereof attract 5% GST under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate), dated 28-06-2017, if supplied to fishing vessels - However, if the impugned goods are supplied for use other than for fishing vessels and goods covered under 8901, 8904, 8905, 8906 and 8907, in such a case GST at the rate applicable under the respective GST Tariff Heading under which they are classified, will apply. Further, goods which do not conform to parts of marine engines will not be covered under the said Sr. No. 252 of Notification No. 1/2017-CT.(Rate), dated 28-6-2017. Whether GST rate of 5% can be charged on supply of marine engines of heading 8407 and heading 8408 and/or their spare parts of heading 8409 when it is supplied for use of defense purpose, patrolling purpose, flood relief and rescue operations being part of heading 8901, 8904, 8905, 8906, 8907? - HELD THAT - Marine engine, and parts thereof will be covered under Sr. No. 252 of Notification No. 1/2017-C.T.(Rate), dated 28-6-2017, when used in the manufacture of goods falling under 8901, 8902, 8904, 8905, 8906, 8907. Items which do not conform to parts of marine engines will not be covered under the said Sr. No. 252 of Notification No. 1/2017-C.T.(Rate), dated 28-6-2017.

Issues Involved:

1. Whether GST rate of 5% can be charged on the supply of marine engines and their spare parts based on their ultimate use as part of fishing vessels.
2. Whether GST rate of 5% can be charged on the supply of marine engines and their spare parts when supplied for defense, patrolling, flood relief, and rescue operations.

Issue-wise Detailed Analysis:

1. GST Rate on Marine Engines for Fishing Vessels:

The applicant, M/s Ocean Blue Boating Pvt Ltd, imports marine propulsion engines (HSN 8407, 8408) and spare parts (HSN 8409) and supplies them for use in fishing vessels, police, defense, patrol, flood relief, and rescue operations. They sought clarification on whether these supplies could be taxed at a reduced GST rate of 5% under Sr. No. 252 of Notification No. 1/2017-Central Tax (Rate), dated 28-06-2017, based on their ultimate use in fishing vessels classified under HSN 8902.

Observations:

- The marine engines are imported under HSN Codes 8407/8408, and spare parts under HSN Code 8409.
- Fishing vessels fall under HSN 8902, and parts of these vessels attract a GST rate of 5% as per Sr. No. 252 of Notification No. 01/2017-C.T (Rate).
- Circular No. 52/26/2018-GST dated 09.08.2018 clarifies that parts of fishing vessels under HSN 8902, including marine engines under HSN 8408, attract a 5% GST rate.
- The authority referred to a previous ruling in the case of M/s MAN Energy Solutions India Private Limited, which held that marine diesel engines and parts thereof used in goods under HSN 8901, 8902, 8904, 8905, 8906, 8907 qualify for the reduced GST rate.

Conclusion:

Marine engines (HSN 8407, 8408) and their parts (HSN 8409) supplied for use in fishing vessels (HSN 8902) are covered under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate), attracting a GST rate of 5%.

2. GST Rate on Marine Engines for Defense, Patrolling, Flood Relief, and Rescue Operations:

The applicant also queried whether the 5% GST rate applies when marine engines and spare parts are supplied for defense, patrolling, flood relief, and rescue operations under HSN 8901, 8904, 8905, 8906, 8907.

Observations:

- The reasoning applied to the first issue is also applicable to this query.
- Marine engines and parts thereof will be covered under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate) when used in the manufacture of goods falling under HSN 8901, 8902, 8904, 8905, 8906, 8907.

Conclusion:

GST rate of 5% can be charged on the supply of marine engines (HSN 8407, 8408) and their parts (HSN 8409) when supplied for use in ships/vessels under HSN 8901, 8902, 8904, 8905, 8906, 8907, which may be used for defense, patrolling, flood relief, and rescue operations. Goods not conforming to "parts of marine engines" will not be covered under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate).

Order:

1. Marine engines (HSN 8407, 8408) and their parts (HSN 8409) used in fishing vessels (HSN 8902) attract 5% GST under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate).
2. Marine engines (HSN 8407, 8408) and their parts (HSN 8409) supplied for use in ships/vessels under HSN 8901, 8902, 8904, 8905, 8906, 8907, for defense, patrolling, flood relief, and rescue operations, attract 5% GST under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate). Goods not conforming to "parts of marine engines" are excluded.

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