2025 (7) TMI 1600 - AAAR - GST

Classification of PVC raincoats - to be classified as plastic (HSN Code 3926) or textile (HSN Code 6201) items under GST? - GST rate of PVC raincoat - If the price of PVC raincoat comes under Rs. 1000/- then does it attract 5% tax on it? - HELD THAT - PVC is nothing but a synthetically prepared plastic - the Explanatory Notes of both Chapters 39 and 62 categorizing goods under such HSNs being mutually exclusive clearly indicate that plastic raincoats under Chapter 39 are not to be treated as raincoats covered under chapter 62. It is evident that PVC is correctly classified as a synthetic polymer of plastic and not a woven textile. Hence classification of PVC raincoats as textile apparel under HSN Code 6201 would be erroneous insofar as PVC is not a woven textile. The entry in sl. No. 223 of Schedule I of CGST Rate N/N. 1/2017-Central Tax (Rate) dated 28-06-2017 read with corresponding WBGST Rate N/N. 1125-F.T. dated 28-06-2017 being Articles of clothing accessories not knitted or crocheted of sale value not exceeding Rs. 1000 per piece attracting GST @5% is specifically relating to items under HSN Chapter Code 62 whereas the entry in sl. No. 111 of Schedule III of CGST Rate N/N. 1/2017-Central Tax (Rate) dated 28-06-2017 read with corresponding WBGST Rate Notification No. 1125-F.T. dated 28-06-2017 Other articles of plastics and articles of other materials of heading 3901 to 3914 (other than plastic bangles plastic beads and feeding bottles) attracting GST @ 18% pertains to HSN Code 39.26. It is already clear that PVC raincoats are articles made by sealing sheets of plastics and hence are to be classified under HSN Code 39.26. Chapters 39 and 62 categorizing goods under such HSNs being mutually exclusive thus clearly indicate that plastic raincoats under Chapter 39 cannot be treated as raincoats covered under chapter 62 - the item PVC raincoat being apparel which is primarily composed of polyvinyl chloride (PVC) would be classified under HSN Code 3926 and not under HSN Code 6201. Supply of PVC raincoat as manufactured by the appellant would be covered under HSN Code 3926 and attract tax @ 18% vide entry no. 111 of Schedule III of CGST Rate N/N. 1/2017-Central Tax (Rate) dated 28-06-2017 read with corresponding WBGST Rate N/N. 1125-F.T. dated 28-06-2017 as amended from time to time.

Summary

ISSUES:

Whether PVC raincoats should be classified as plastic items under HSN Code 3926 or as textile items under HSN Code 6201 for the purpose of GST classification.What GST rate applies to PVC raincoats, specifically whether raincoats priced below Rs. 1000 attract a 5% GST rate.Whether delay in filing the appeal beyond the stipulated period under section 100(2) of the GST Act can be condoned.

RULINGS / HOLDINGS:

PVC raincoats are classified under HSN Code 3926 as "articles made by sealing sheets of plastics" and not under HSN Code 6201 which applies only to made-up articles of textile fabric; thus, the classification under Chapter 39 (plastics) and not Chapter 62 (textiles) is appropriate.The applicable GST rate on PVC raincoats is 18% as per entry no. 111 of Schedule III of CGST Rate Notification No. 1/2017-Central Tax (Rate), dated 28-06-2017, and corresponding State notifications; the 5% GST rate applicable to items under HSN Chapter 62 (textiles) priced below Rs. 1000 does not apply to PVC raincoats.The delay in filing the appeal beyond the prescribed thirty days is condoned under the proviso to sub-section (2) of section 100 of the GST Act, as sufficient cause was shown due to the complexity of interpretational issues and voluminous research.

RATIONALE:

The classification is governed by the Harmonized System Nomenclature (HSN) as adopted under GST, where Chapter 62 applies exclusively to made-up articles of textile fabric, excluding plastics, and Chapter 39 covers plastics and articles thereof including PVC.Explanatory Notes to Chapter 62 clarify that it applies only to "made up articles of any textile fabric," while Chapter 39's Explanatory Notes include "articles of apparel and clothing accessories made by sewing or sealing sheets of plastics e.g., raincoats."Polyvinyl chloride (PVC) is a synthetic polymer classified as plastic under Chapter 39, not a woven textile; the manufacturing process of PVC raincoats involves fusion methods producing a non-woven, seamless product, distinguishing it from textile fabrics.Judicial precedents emphasize that "textiles" derive from the Latin 'texere' meaning 'to weave' and require woven fabric to qualify as textiles; PVC raincoats do not meet this criterion due to their non-woven plastic composition.The principle of classification accords primacy to the material composition and manufacturing process over the intended use or commercial description when HSN chapters are mutually exclusive.The GST rate structure is directly linked to HSN classification; thus, the 18% rate applicable to plastic articles under HSN 3926 governs PVC raincoats, not the 5% rate under textile classifications.The court confirmed the earlier Advance Ruling Authority's decision, finding no error in its interpretation or application of statutory provisions and HSN explanatory notes.The condonation of delay is consistent with the statutory provision allowing extension for sufficient cause, recognizing the complexity of the classification issue.