2022 (7) TMI 179 - AAR - GST

Classification of goods - three-wheeled electrically operated vehicle, commonly known as e-rickshaw, when sold without battery - classifiable as an electrically operated motor vehicle under HSN 8703 or not - rate of tax - HELD THAT - Chapter 87 of the First Schedule to the Customs Tariff Act,1975 classifies Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof - Furthermore, Other vehicles, with only electric motor for propulsion under Tariff item 8703 80 covers Three-wheeled vehicles having HSN Code 8703 80 40. It appears that e-rickshaw being a three-wheeled electrically operated vehicle would be classifiable under tariff item 8703 80 40. But the issue in hand is not to decide the HSN code of e-rickshaw rather the issue, as it is found, is confined to decide whether fitting of battery is a pre-condition or not so as to qualify an e-rickshaw as an electrically operated vehicle. In the present case, the power of a battery operated vehicle is solely generated from the rechargeable battery since it doesn t have any other source of propulsion. Electrically operated vehicles as it has been explained in serial number 242A of the Notification No. 12/2019-Central Tax (Rate) dated 31.07.2019 requires a single factum that the vehicles will run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles. There is not an iota of doubt that unless the battery is fitted to an e-rickshaw, it will not be capable to run. But the question arises that when an e-rickshaw, having a motor fitted on it, is supplied without battery, does it lose its original character and can be termed as chassis . Thus, when a vehicle which is solely operational on battery power is supplied without battery, the same will qualify as a supply of electrically operated vehicle and therefore shall be classifiable under tariff item 8703.

Issues Involved:
1. Classification of a three-wheeled electrically operated vehicle (e-rickshaw) without a battery.
2. Determination of the applicable tax rate for such a vehicle.

Issue-Wise Detailed Analysis:

1. Classification of a three-wheeled electrically operated vehicle (e-rickshaw) without a battery:

1.1 The applicant, engaged in the business of electrically operated two-wheeled vehicles, seeks to manufacture and resell three-wheeled electrically operated vehicles (e-rickshaws) in West Bengal.

1.2 The applicant filed an application under Section 97(1) of the GST Act to determine whether an e-rickshaw without a battery is classifiable under HSN 8703 as an "electrically operated motor vehicle."

1.3 The applicant cited definitions from the Motor Vehicles Act, 1988, and the Central Motor Vehicles Rules, 1989, to argue that an e-rickshaw is a special purpose battery-powered vehicle and that the battery does not need to be supplied by the manufacturer.

1.4 The applicant emphasized that an electric motor is not an engine and that an e-rickshaw, even without a battery, remains a battery-operated vehicle as long as it is designed to be powered exclusively by an electric motor.

1.5 The applicant referenced Rule 122 of the CMVR, 1989, which requires the embossment of the motor number (not the engine number) on battery-operated vehicles.

1.6 The applicant argued that under the Customs Tariff Act, 1975, Chapter 87, specifically sub-heading 87038040, covers "Three-wheeled vehicles" with only an electric motor for propulsion.

1.7 The applicant also referred to Notification No. 01/2017-CT dated 28.06.2017, which specifies different GST rates for vehicles under Chapter 87, including electrically operated vehicles.

1.8 The applicant contended that the purpose of selling an e-rickshaw without a battery is commercial and does not alter its classification as an electrically operated vehicle.

1.9 The applicant cited a ruling by the Orissa Authority for Advance Ruling, which classified two or three-wheeled battery-powered electric vehicles without a battery under HSN 8703 as electrically operated vehicles.

2. Determination of the applicable tax rate for such a vehicle:

2.1 The Revenue officer agreed that the subject product falls under Chapter 87 as an electrically operated vehicle, based on the applicant's submission.

2.2 The Authority examined whether the absence of a battery disqualifies an e-rickshaw from being classified as an electrically operated vehicle under HSN 8703.

2.3 Chapter 87 of the Customs Tariff Act, 1975, classifies vehicles other than railway or tramway rolling-stock, and parts and accessories thereof. Tariff item 8703 covers motor cars and other motor vehicles designed for the transport of persons, including three-wheeled vehicles under sub-heading 87038040.

2.4 The Authority noted that e-rickshaws, being three-wheeled electrically operated vehicles, fall under tariff item 87038040. The issue was whether the absence of a battery affects this classification.

2.5 Electrically operated vehicles, including two and three-wheeled electric vehicles, attract a 5% tax rate (CGST @ 2.5% + SGST @ 2.5%) from 01.08.2019, as per Notification No. 12/2019-Central Tax (Rate) dated 31.07.2019.

2.6 The Authority considered the applicant's argument that an e-rickshaw uses only an electric motor for propulsion and that the absence of a battery does not change its classification.

2.7 The Authority reviewed the main components of a battery-operated vehicle (BEV), noting that the power is solely generated from the rechargeable battery, which is essential for propulsion.

2.8 The Authority referenced the Orissa AAR's ruling in the case of Anjali Enterprises, which held that fitting a battery at the time of supply is not a pre-condition for classifying a vehicle as electrically operated.

2.9 The Authority concluded that an e-rickshaw without a battery still qualifies as an electrically operated vehicle under tariff item 8703.

Ruling:
A three-wheeled electrically operated vehicle, commonly known as e-rickshaw, when supplied without a battery, is classifiable as an "electrically operated motor vehicle" under HSN 8703.

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