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2021 (12) TMI 721 - AUTHORITY FOR ADVANCE RULING, KARNATAKAClassification 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.
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