2025 (7) TMI 1601 - 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 GST purposes.The applicable GST rate on PVC raincoats, specifically whether a 5% tax rate applies if the price is below Rs. 1000/-.Whether delay in filing the appeal beyond the stipulated time limit can be condoned under Section 100(2) of the GST Act.

RULINGS / HOLDINGS:

PVC raincoats are correctly classified under HSN Code 3926 as articles of plastic, not under HSN Code 6201 as textile articles, because PVC is a synthetic polymer plastic and the raincoats are non-woven products formed by fusion methods, thus not qualifying as woven textile fabrics.The applicable GST rate on PVC raincoats classified under HSN Code 3926 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 delay in filing the appeal beyond thirty days is condoned under the proviso to sub-section (2) of section 100 of the GST Act due to sufficient cause shown, including complexity of interpretational issues and voluminous research.

RATIONALE:

The Court applied the Harmonized System Nomenclature (HSN) classification framework, which is the basis for GST rate determination, relying on the World Customs Organization's Explanatory Notes for Chapters 39 and 62.HSN Chapter 62 applies exclusively to made-up articles of textile fabric that are woven, excluding plastics; Chapter 39 covers plastics and articles thereof, including synthetic polymers such as PVC.The Court referred to authoritative judicial precedents emphasizing that 'textiles' must be woven fabrics, as articulated in Porritts & Spencer (Asia) Ltd., and that classification must accord with the popular and commercial understanding of the goods, not merely the manufacturing process or raw materials.The Court noted that PVC raincoats are manufactured by sealing sheets of plastic via thermal or chemical fusion, resulting in a non-woven product, thus excluding them from the textile classification under Chapter 62.The principle of mutual exclusivity between HSN Chapters 39 and 62 was applied to conclude that plastic raincoats cannot be classified as textile raincoats.The Court acknowledged the appellant's submissions regarding prior advance rulings and judicial decisions but found them inapplicable given the material composition and manufacturing process of the PVC raincoats in question.The delay in filing the appeal was condoned based on the statutory provision allowing discretion where sufficient cause is shown, recognizing the complexity of the classification issue.