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RECENT ADVANCE RULINGS IN GST (PART-13)

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RECENT ADVANCE RULINGS IN GST (PART-13)
Dr. Sanjiv Agarwal By: Dr. Sanjiv Agarwal
February 15, 2019
All Articles by: Dr. Sanjiv Agarwal       View Profile
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Advance rulings are important in any tax law as it provides a forum for clarification and possible interpretation of statutory provisions. Moreover, it conveys the legislative intention from the revenue’s view point. Provisions of advance ruling are contained in section 95 to 106 of CGST Act, 2017 and State / UT GST enactment. Rules 103 to 107 of also provide for forms, manner, certification etc.

The Authority for Advance Rulings (AAR) have been set up in all the states and we have now over 300 advance rulings on different issues already pronounced by various State Authorities. The appellate mechanism for filing appeals against AAR rulings is also in place and we have about twenty five such appellate orders confirming or modifying the AAR orders. One major issue presently being faced is about multiple authorities (equal to number of States), each pronouncing a ruling of its own even if the matter is covered by some other State AAR’s rulings.  Even the orders from Appellate Authority for Advance Ruling have also started pouring in and we have over two dozen Appellate Orders from AAAR. There are situations where we may have different rulings on same question(s) by different AARs. GST Council / Cabinet has now approved (on 23.01.2019)  to have a Centralized Appellate Authority for Advance Ruling under GST that would decide on cases where there are divergent orders at the State level.

The summary of few more recent advance rulings pronounced by State Advance Ruling Authorities are discussed hereunder but these needs to be read in the background of the question involved:

Advance Ruling on classification of goods and rate of tax

The applicant was engaged in the manufacture of marine propeller, rudder set, stern tube set, propeller shaft and M.S. Shaft for couplings being used for the purposes of fishing and other allied activities. It made an application before the Authority for Advance Ruling seeking ruling on the rate of GST applicable to the such products.

It was ruled that commodities such as marine propellers, rudder set, stern tube set, propeller shaft and M.S. Shaft for couplings used as a part of fishing/floating vessels would come under Entry No. 252 of Schedule I of Notification No. 1/2017 Central Tax (Rate), dated 28-6-2017 and State Notification No. 360/2017, dated 30-6-2017 and hence taxable at the rate of 5 per cent [SGST - 2.5 per cent; CGST-2.5 per cent]. If the said commodities are used for some other purpose, then the applicable tax rate would be 18 per cent. [In Re: Saraswathi Metal Industries  2018 (11) TMI 282 - AUTHORITY FOR ADVANCE RULINGS, KERALA ].

Advance Ruling on classification of goods and rate of tax (implants)

The applicant was engaged in the distribution and trading of ‘implants for joint replacement’. The applicant preferred an application for Advance Ruling on the rate of tax in respect of the above product. The applicant was of the view that as per rule 3 of the General Rules for Interpretation of Import Tariff the heading that provides the most specific description shall be preferred to headings providing a more general description. In view of the rule 3, implants for joint replacement was clearly and most specifically covered under Sl. No. E(9) of List 3 of Entry 257 of Schedule I attracting 5 per cent GST.

The question that arose for consideration is whether the implants for joint replacements falling under HSN Code/Chapter Sub-Heading 90213100 - Artificial Joints of the Customs Tariff Act, 1975 is covered under Serial No. E(9) of List 3 of Entry 257 of Schedule I of Notification No. 01/2017 - Central Tax (Rate) dated 28-6-2017 attracting GST at the time of 5 per cent or Serial No. 221 of Schedule II of the Notification No. 01/2017 - Central Tax (Rate) dated 28-6-2017 attracting GST at the rate of 12 per cent.

The AAR observed that on a plain reading of entry at Serial No. E(9) of List 3 of Entry 257 of Schedule I and entry at Serial No. 221 of Schedule II of Notification No. 01/2017 - Central Tax (Rate) dated Sl. No. Chapter/Heading/Sub-Heading/Tariff item Description of goods (1)(2)(3) 578 90 or any other Chapter Assistive devices, rehabilitation aids and other goods for disabled, specified in List 30 28-6-2017, it is evident that joint replacements are specifically covered under the entry at Serial No. E(9) of List 3 of Entry 257 of Schedule I whereas the entry at Sl. No. 221 of Schedule II is a general entry that covers artificial parts of body. Therefore, applying the principle under rule 3 of the General Rules of Interpretation of the First Schedule to the Customs Tariff Act, 1975; that the heading which provides the most specific description shall be preferred to headings providing a more general description it is held that the joint replacements falling under HSN Code 90213100 are covered under Serial No. E(9) of List 3 of Entry 257 of Schedule I of Notification No. 01/2017 - Central Tax (Rate) dated 28-6-2017 attracting GST at the rate of 5 per cent.

The Authority for Advance Ruling ruled that ‘Implants for joint replacements’ falling under HSN Code 90213100 are covered under Serial No. E(9) of List 3 of Entry 257 of Schedule I of Notification No. 01/2017 - Central Tax (Rate), dated 28-6-2017 attracting GST at rate of 5 per cent. [In Re: Veena Chemicals  2018 (6) TMI 705 - AUTHORITY FOR ADVANCE RULINGS, KERALA ].

Advance Ruling on classification of goods and rate of tax

The assessee/applicant made an application before the Authority for Advance Ruling seeking ruling on rate of tax on 'Agricultural Soil testing Minilab and its Reagent Refills'. It stated that the said product would fall under Heading No. 8201 of the GST Tariff.

The Authority for Advance Ruling ruled that Product 'Agricultural Soil testing Minilab and its Reagent Refills' classifiable under Heading No. 9027 of GST Tariff and tax rate applicable would be 9 per cent CGST + 9 per cent SGST. [In Re: Nagarjuna Agro Chemicals (P.) Ltd. 2018 (6) TMI 465 - AUTHORITY FOR ADVANCE RULING HYDERABAD TELANGANA ].

Advance Ruling on classification of goods

The assessee/applicant was engaged in the business of manufacturing and sale of digital printed materials. It made an application before the Authority for Advance Ruling seeking ruling on the following issues:

  1. Whether the printed advertisement materials classifiable as 'supply of goods.'
  2. If yes, whether it was classifiable under Heading No. 4911 of the First Schedule to the Customs Tariff Act, 1975.

It was ruled that where assessee was engaged in business of manufacturing and sale of digital printed advertisement materials, said material would be classifiable as supply of goods and it would fall under Heading No. 4911 of GST Tariff and liable to GST at rate of 12 per cent. [In Re: Macro Media Digital Imaging (P.) Ltd. 2018 (6) TMI 519 - AUTHORITY FOR ADVANCE RULING HYDERABAD TELANGANA ]

Advance ruling on HSN Code and Classification

The applicant sought an advance ruling in respect of the applicability of GST on the correct Harmonized System of Nomenclature (HSN) Code and the applicable GST rate for products MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) and MIDEL eN 1215 (soya oil based dielectric transformer fluid) in terms of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017.

The impugned products had a distinct identity as being a 'transformer fluid'. They are also given distinct names to establish their identity. The impugned products are vegetable oil based. Neither the exact ingredients nor the exact additives, and the composition of each of these are available. The information shows that the products are a blend of natural triglyceride esters. They also contain additives. The applicant has argued that the quantity of additives in their products is minimal, i.e., 0.3 per cent of the total weight of the product. Therefore, the said products cannot be considered as 'mixtures'.

The AAR observed that the products are not vegetable fats and vegetable oils per se. the products do not remain mere vegetable fat or mere vegetable oil. The impugned products are a distinct product which is known in the market as a dielectric transformer fluid. The applicant has argued that the products cannot be considered as 'mixtures' but no information about the manufacturing process has been given. Neither any information has been shared as to the ingredients contained in the products. The products also contain additives, the information about which has also not been shared with the Authority. But the manufacturing process of these ingredients and the addition of additives leads to a distinct product being formed. The ingredients or additives are added so as to formulate a certain product which could be used as a transformer fluid. So the processes are intended to manufacture a new commodity in which rapeseed oil or soya would be the prime ingredient. Owing to this, the products are described as 'rapeseed oil based' or 'soya based' and not being 'rapeseed oil' per se or 'soya' per se. The end product has a distinct identity in the sense that when one desires to have vegetable oil, the impugned products would not be accepted.

It was concluded that entry Nos. 88 and 90 of Schedule I of the Notification No. 1/2017-Central/State Tax (Rate) would not cover the impugned products. The impugned products are not covered by any entry of the Schedule in the Notification No. 2/2017-Central/State Tax (Rate) for goods exempted from GST. It is only the question of Entry No. 90 or any other entry of the Notification No. 1/2017-Central/State Tax (Rate) which would cover the impugned products.

Thus, the product, i.e., MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) and MIDEL eN 1215 (soya oil based dielectric transformer fluid) would fall in schedule entry 27 of Schedule II of the Notification No. 1/2017-Central/State Tax (Rate) under Tariff Heading 1518 and thereby taxable at the rate of 6 per cent, each of Central Goods and Services Tax and the Maharashtra Goods and Services Tax.  [In Re: M & I Materials India (P.) Ltd.   2018 (7) TMI 1493 - AUTHORITY FOR ADVANCE RULING - MAHARASHTRA ; ].

(Some more to follow …..)

 

By: Dr. Sanjiv Agarwal - February 15, 2019

 

 

 

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