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2021 (12) TMI 721 - AAR - GSTClassification of goods - Marine Engines - HSN Code 8407 and its spare parts exclusively used as part of fishing vessel of heading 8902 - levy of GST on supply of materials and labour charges incurred during the warranty period, free of cost - rate of tax for collection made towards supply of materials and labour charges towards repair of fishing vessels of heading 8902 - puff insulated ice boxes used by fishermen in fishing vessels for reducing spoilage and maintaining good hygiene - marine engine coming under HSN Code 8407 supplied to Defence Department for patrol, flood relief and rescue operations - HELD THAT - It is an admitted fact that the applicant is classifying marine engines under Customs Tariff Heading 8407 21 00- Outboard motors -Marine Propulsion engines. Further the Fishing vessels, factory ships and other vessels for processing or preserving fishery products fall under Customs Tariff Heading 8902 and is liable to GST at the rate of 5% as per entry at SI.No.247 of Schedule I of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 - In the instant case, the applicant admitted to be supplying marine engines (HSN 8407 21 00) and spares for fishing vessels (HSN 8902) as parts of the same. The marine engines and spare parts used for fishing vessels (being part of the fishing vessel) attract 5% GST. If marine engine is supplied for use other than as parts of fishing vessels as stated above, the rate of GST is applicable under the respective Customs Tariff Headings in which they are classified. Whether GST leviable on supply of materials and labour charges incurred during the warranty period, free of cost? - HELD THAT - During the warranty period the goods and service have been supplied to customers as free of charge. No separate consideration is charged and received at the time of replacement. This is because consideration for the same has been recovered at the time of supply of principal goods. However, the tax on the same would have been paid at the time of principal supply of goods; as such costs are included in the price of principal goods supplied. Therefore the replacement of the goods and service during the warranty period without consideration does not come under the purview of supply and no GST is leviable in such case. Rate of tax applicable for collection made towards supply of materials and labour charges towards repair of fishing vessel of heading 8902 - HELD THAT - Though in the process of maintenance or repair of fishing vessels there is supply of goods/spare parts, there is no transfer of title in the goods/spare parts as such and hence the supply of goods/ spare parts are ancillary to the repair or maintenance of the fishing vessels. Hence the predominant element of the supply is not the transfer of title in goods/spare parts but that of service of repair or maintenance and the supply of goods/spare parts being ancillary/incidental to the activity of repair or maintenance it is appropriately classifiable under Heading 9987-998714 - Maintenance and repair of transport machinery and equipment under the Scheme of Classification of Services notified as Annexure to Notification No.11/2017 Central Tax (Rate) dated 28.06.2017 and is liable to GST at the rate of 18% (9%-CGST 9%-KGST) as per SI.No.25(ii) of the Notification No.11/2017 Central Tax (Rate) dated 28.06.2017. Rate of tax on puff insulated ice boxes used by fishermen in fishing vessels for reducing spoilage and maintaining good hygiene - HELD THAT - The puff insulated ice boxes are appropriately classifiable under Customs Tariff Heading 3923 10 30 - Articles for the conveyance or packing of goods, made of plastics - Boxes, cases, crates and similar articles - Insulated ware. The said articles falling under Customs Tariff Head 3923 are liable to GST at the rate of 18% 9% -CGST 9%-KGST as per entry at Sl.No.108 of Schedule III of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017. The ice box is used in the fishing vessels for storage of fish to reduce spoilage and to maintain freshness of fish during conveyance. The product cannot be considered as a part of fishing vessel falling under Customs Tariff Heading 8902 and hence is not eligible for the concessional rate of GST as per entry at Sl.No.252 of Schedule I of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017. Rate of tax on marine engine coming under HSN Code 8407 supplied to Defence Department for patrol, flood relief and rescue operations - HELD THAT - The marine engines are supplied for use as part of vessels used by the Defence and other agencies for patrol, relief and rescue operations fall under Customs Tariff Heading 8906-Other vessels including warships and lifeboats other than rowing boats. As per entry at Sl.No.252 of Schedule I of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017 parts of goods of heading 8901,8902, 8904, 8905, 8906, 8907 falling under any chapter of the Customs Tariff attracts GST at the rate of 5%. Therefore, if the marine engines are supplied for use as part of vessel falling under Customs Tariff Heading 8906, which are used by the Department of Defense and other agencies for patrol, relief and rescue operations, then the marine engine as part of such vessel will only attract GST at the rate of 5% as per the said entry.
Issues Involved:
1. Rate of tax on Marine Engines under HSN Code 8407 and its spare parts for fishing vessels. 2. GST applicability on supply of materials and labor charges during the warranty period. 3. Rate of tax for collection towards supply of materials and labor charges for repair of fishing vessels. 4. Rate of tax on puff insulated ice boxes used by fishermen. 5. Rate of tax on marine engines under HSN Code 8407 supplied to Defence Department. Detailed Analysis: 1. Rate of Tax on Marine Engines and Spare Parts: The applicant sought clarification on the GST rate applicable to marine engines and their spare parts used in fishing vessels. The judgment confirmed that marine engines classified under HSN 8407 21 00 and their spare parts used in fishing vessels classified under HSN 8902 attract a GST rate of 5% (2.5% CGST + 2.5% SGST). This is in accordance with entry at Sl.No.252 of Schedule I of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017 and further clarified by CBIC Circular No.52/26/2018-GST dated 09.08.2018. However, if these engines are supplied for use other than as parts of fishing vessels, the applicable GST rate would be determined by their respective Customs Tariff Headings. 2. GST on Supply of Materials and Labor Charges During Warranty: The applicant queried whether GST is leviable on the supply of materials and labor charges provided free of cost during the warranty period. The judgment referred to Sectorial FAQs by CBIC for IT/ITES sectors which clarified that no GST is chargeable on such replacements as the value of supply made earlier includes the charges to be incurred during the warranty period. Therefore, the provision of materials and labor during the warranty period without consideration does not come under the purview of supply, and no GST is leviable. 3. Rate of Tax for Repair of Fishing Vessels: The applicant sought the rate of tax applicable for collections made towards supply of materials and labor charges for the repair of fishing vessels. It was determined that the repair services of fishing vessels are classifiable under SAC 998714 and liable to GST at the rate of 18% (9% CGST + 9% SGST) as per Sl.No.25(ii) of Notification No.11/2017 Central Tax (Rate) dated 28.06.2017. The judgment emphasized that if the supply of goods and services are separately charged and shown, the spare parts will attract GST at the rate of 5% while the services will attract 18%. 4. Rate of Tax on Puff Insulated Ice Boxes: The applicant sought the rate of tax on puff insulated ice boxes used by fishermen. The judgment classified these ice boxes under Customs Tariff Heading 3923 10 30 - Articles for the conveyance or packing of goods, made of plastics - Insulated ware. These items are liable to GST at the rate of 18% (9% CGST + 9% SGST) as per entry at Sl.No.108 of Schedule III of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017. The ice boxes cannot be considered as parts of fishing vessels and therefore do not qualify for the concessional GST rate of 5%. 5. Rate of Tax on Marine Engines Supplied to Defence Department: The applicant sought the rate of tax on marine engines supplied to the Defence Department for patrol, flood relief, and rescue operations. The judgment clarified that marine engines supplied for use as part of vessels under Customs Tariff Heading 8906 (Other Vessels, including warships) used by the Defence and other agencies for patrol, relief, and rescue operations attract a GST rate of 5% (2.5% CGST + 2.5% SGST) as per entry at Sl.No.252 of Schedule I of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017. Ruling: i. Marine engines and spare parts for fishing vessels (CTH 8902) attract 5% GST. If used otherwise, the applicable GST rate depends on their classification. ii. No GST is leviable on the provision of materials and labor during the warranty period provided free of cost. iii. Repair services for fishing vessels are classified as composite supply under Heading 9987-998714 and attract 18% GST. iv. Puff insulated ice boxes are classified under Customs Tariff Heading 3923 10 30 and attract 18% GST. v. Marine engines supplied for use in vessels under Customs Tariff Heading 8906 for Defence and other agencies attract 5% GST.
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