2019 (9) TMI 1047 - AAR - GST

Classification of goods - rate of tax - manufacture of locomotive spares in accordance with the drawings and specifications of the railway authority - whether classified under heading 8607 of the First Schedule to the Customs Tariff Act 1975 - HELD THAT - The Applicant has supplied the goods to the railways. It appears from the scrutiny of the list of the goods manufactured and the relevant purchase orders that they are components of railway locomotives. However Notes 2 and 3 of Section XVII which includes Chapters 86 to 89 prohibits classification of a few articles as parts or accessories under these Chapters. Therefore components of railway locomotives should be classified under heading 8607 subject to the provisions of Notes 2 and 3 of Section XVII. The composite goods manufactured by the Applicant that are used primarily as parts of railway locomotives are to be classified under heading 8607 and taxable @ 5% GST with no refund of the unutilized input tax credit. The same classification will apply to the Applicant s other supplies to the railways if they are used primarily as parts of railway locomotives provided they are not excluded by Note 2 of Section XVII. Supplies other than the above two categories if any shall not be classified under heading 8607.

Summary

Issues:
1. Admissibility of the Application
2. Classification of goods manufactured by the Applicant
3. Applicable rate of tax for the goods supplied to railways

Admissibility of the Application:
The Applicant, a manufacturer of railway locomotive spare parts, sought a ruling on the classification of the items it manufactured and the applicable tax rate, which was deemed admissible under Section 97(2)(a) & (b) of the GST Act. The Application was admitted as the question raised had not been previously decided by any authority under the GST Act.

Classification of goods manufactured by the Applicant:
The Applicant manufactured locomotive spares in line with railway authority specifications and classified them under Heading 8607 of the Customs Tariff Act. The Authority clarified that components of railway locomotives should be classified under heading 8607, subject to specific provisions of Notes 2 and 3 of Section XVII. The ruling emphasized that parts of locomotives, unless excluded by Note 2 of Section XVII, should be classified under heading 8607 if used solely or principally as parts of railway locomotives.

Applicable rate of tax for the goods supplied to railways:
The ruling specified that composite goods used primarily as parts of railway locomotives are to be classified under heading 8607 and taxed at 5% GST without refund of unutilized input tax credit. This classification also applies to other supplies to railways if used primarily as locomotive parts, unless excluded by Note 2 of Section XVII. Goods not falling under these categories shall not be classified under heading 8607.

The judgment provided detailed analysis on the admissibility of the application, classification of goods, and the applicable tax rate for supplies to railways. It clarified the specific provisions under the GST Act and Customs Tariff Act, ensuring accurate classification of goods manufactured by the Applicant for railway locomotives.