GST ON CAR SEAT COVERS AND ACCESSORIES – ADVANCE RULING

[Dr. Sanjiv Agarwal]

Automobile Dealers and traders in car accessories are engaged in the business of sale and supply of car seat covers, and other allied accessories necessary for seats. The manufacturers supply and sell seat covers to car seat makers who affix the seat covers into the seats and thereafter the seat is affixed to the motor vehicle. The manufacturer approached the Authority for Advance Ruling on the classification and rate of GST on car seat covers.

While there is a lot of doubt or confusion on the classification issue of the specific product i.e., 'car seat' covers', in one of the recent rulings by Authority for Advance Rulings, IN RE: M/S. SADDLES INTERNATIONAL AUTOMOTIVE & AVIATION INTERIORS PRIVATE LIMITED [2021 (8) TMI 538 - AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH] , the Authority for Advance Ruling, Andhra Pradesh observed that ‘Car seat covers’ fall under the entry at Serial No.170 under HSN 8708 Schedule IV of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 attracting tax rate of CGST+SGST (14%+14%) @ 28%.

The manufacturer sought advance ruling from the Authority for Advance Ruling, on the following issues:

1. Whether the product, namely, 'Car Seat Covers' merits classification under HSN 9401? If not, what is the correct classification applicable to 'Car Seat Covers'?

2. Is S.No.435A of Schedule IV of the Notification No 1/2017-Central Tax (Rate) dated 28.06.2017 applicable to 'Car Seat Covers'? If not, what should be the applicable entry under the said Notification?

The product 'car seat covers' attract a net rate of 28% (CGST+SGST) under both the competing entries (8708 and 9401) under Notification No.1/2017 – Central Tax (Rate) dt: 28.06.2017 before amendment. The relevant entries and their respective tax rates before amendment are tabulated herein below:

S.No.	Chapter/Heading/sub-heading/Tariff Item	Description of Goods	Rate (%)
170	8708	Parts and accessories of the motor vehicles of headings 8701 to 8705 (other than specified parts of tractors)	14
211	9401	Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof	14

It was submitted that Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 was amended vide Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017 which reduced the rate of CGST with respect to Serial No.211 from 28% to 18%. Serial No.211 was omitted and a new Serial No.435A was inserted.

The relevant portion of Notification No.41 reads as below:

“(C) in Schedule III -18% -

(cxviii) after S.No.435 and the entries relating thereto, the following serial number and the entries shall be inserted namely:

435A

9401 (other than 9401 10 00)

Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof (other than seats of a kind used for aircraft);

Further, it was contended that 'seat covers' are rightly classifiable under Serial No. 435A (HSN 9401) as the 'seat covers' is an essential and integral 'part of 'seats' without which 'seat' can be rendered dysfunctional; that it is imperative to first understand the roles and the functions which are performed by 'seat covers'.

The key functions of seat covers are summarized as below:

• Seat covers help the driver and co-passenger to get into the most comfortable seating inside the car as per their convenience, which does not absorb heat;
• Car seat covers are required for the protection of seats.
• Covers do not absorb heat and hence, keep the car cool and user comfortable

Therefore, it was opined that the applicant being the manufacturer of seat covers and other allied accessories, sell the manufactured 'seat covers' to car seat makers who in turn affix the seat covers to the seats and there after the seat is fixed to the motor vehicle.

It may be noted that HSN 9401 covers seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof.

The meaning of 'part' as per Cambridge dictionary,

• a separate piece of something, or a piece that combines with other pieces to form the whole of something:
• one of the pieces that together form a machine or some type of equipment:

'Parts' combine to form a whole and they are integral to the completion of any article or equipment.

On the contrary if we examine the definition of 'accessories',

As per Merriam--Webster, Definition of 'accessory',

• an object or device that is not essential in itself but adds to the beauty, convenience, or effectiveness of something else.

eg: auto accessories and clothing accessories

• a thing of secondary or lesser importance : ADJUNCT

The AAR observed after a clear examination of both the terms i.e., 'parts' and 'accessories', 'seat covers' cannot be a part of seats by any means, in the instance case. They are meant for the protection of the seats and the functional value of 'seat covers' is the comfort and convenience it extends to the driver and the passengers. Thus, the 'seat covers' are not essential parts of the seats but accessories that enhance their functional value. Even in general trade parlance or in terms of their specific usage, the 'seat covers' are considered as accessories and customized as per the preferences of the clients. Trade circles consider the automotive accessories as a category of articles relating to non-essential automotive parts which embellish the look and feel of an automobile or add functionality. 'Seat covers' provide new look to the interior of the car, and also make it more comfortable for passengers.

It was further observed that seat covers were covered under 'accessories' in pre-GST regime too. Car seat covers were classified under heading 87.08 as accessories of car seats vide GURU OVERSEAS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NEW DELHI [2001 (5) TMI 87 - CEGAT, COURT NO. IV, NEW DELHI].

Not only this, CBIC Circular in the year 2000 had clarified vide Circular No. 541/37/2000-CX dated 16.08.2000, in which it was clearly mentioned that car seat covers were classified under heading 87.08 as accessories of car seats.

In continuation of the same into the GST period, the entry under HSN 8708 at Serial No.170 under Schedule IV of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 continues to be applicable for seat covers attracting tax rate of CGST+SGST (14%+14%) @ 28%.

The Authority for Advance Ruling, therefore, ruled as follows:

1. Car seat covers fall under the entry at Serial No.170 under HSN 8708 Schedule IV of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 attracting tax rate of CGST+SGST (14%+14%) @ 28%.
2. Not applicable

This ruling comes at an appropriate time clarifying one of the controversial issue being faced by automobile dealers. car seat covers and its accessories are one of the integral part and as such, dealers may be well guided by this pronouncement as they also supply seat covers and its accessories. Though advance rulings are not binding on all except the applicant and jurisdictional authorities, yet it has a persuasive value.