TMI Blog2018 (7) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... identity of an item at the point of supply is of paramount importance - In this case “Rakhi” appeals to the end-consumers because of its specific characteristics which gives the identity of Decorative/Designer/Fancy/Kids “Rakhi”. All the constituent materials are to be considered under Serial No 92(3) of the TRU Clarification and “Rakhi” is to be classified in terms of Rule 3(c) of the Interpretation Rules and will be leviable to GST accordingly - It is seen that “Rakhi” is an independently identifiable product and is also known to be so in common and commercial parlance. The multifarious constituents that go into the making of the “Rakhi” cannot be considered as accessories; the material which provides the essential character to “Rakhi” is varied and the buyer may also be motivated to purchase the same as much for its for its designer/decorative/fancy part, as for its symbolic characteristic of a bond of protection. Ruling:- The Applicant has to classify the goods “Rakhi” as per its constituent materials in accordance with Rule 3(c) of Rules for Interpretation of the Customs Tariff Act, 1975, as laid down in Explanatory Notes (iv) of Notification No 1/2017-CT(Rate) dated 28. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicraft ; f) The Exemption Notification exempts Kalava (raksha sutra) from payment of GST since it is listed as puja samagri ; g) Reference has been made on FAQ published on CBEC website dated 03.08.2017; h) Reference has been made to Rule 3(b) of the Rules for Interpretation of the Customs Tariff Act, 1975 (hereinafter referred to as the Interpretation Rules ); i) Various judgements have been referred to; j) If Rakhi is not considered to be exempt then it may be classifiable under and taxability determined in accordance to Serial No 224 or Schedule I and Serial No 171 of Schedule II of Notification No 1/2017-CT(Rate) dated 28.06.2017 (1125 FT dated 28/06/2017 of State Tax), (hereinafter referred to as the Rate Notification ) 3. The above points of the Applicant are being taken up for careful consideration and discussion, though not in the same order as listed above. 4. The Application states that the manufacture of Rakhi is intended to be taken up by the Applicant. All references to the manufacture and supply of Rakhi are in the future tense, eg intends to manufacture , shall be manufactured , traditionally Rakhi is considered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egime. Notification No 32/2017-Central Tax dated 15.09.2017, later amended as Notification No 38/2017-Central Tax dated 13.10.2017, provides a list of articles which are to be considered as handicraft goods for the purpose of GST when made predominantly by hand by the craftsmen even though some machinery may also be used in the process. Rakhi does not feature in this list. Hence, Rakhi cannot be considered as handicraft for the purpose of GST. 6. The Applicant suggests that if Rakhi is not considered to be exempt then it may be classifiable under and taxability determined in accordance to Serial No 224 of Schedule I and Serial No 171 of Schedule II of the Rate Notification. The Applicant, on being specifically asked, has also stated that one of its partners, M/s M D Mohta Pvt Ltd clears Rakhi under Tariff Heading 6307. As per Rule 1 of the Interpretation Rules the titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes. In other words, even if a Heading or Sub-Heading apparently classifies a produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio are fixed and/or pre-determined Rakhi can be made up of innumerable materials in as many permutations and combinations as the manufacturer wills. 8. Rakhi is referred to as a festival by the Applicant. Raksha Bandhan (and not Rakhi ), is the festival which is observed on the last day of the Hindu lunar calendar month of Shraavana, and on this day, sisters of all ages tie a Rakhi , around the wrists of their brothers, traditionally investing the brothers with a share of the responsibility of their potential care. The expression Raksha Bandhan, Sanskrit, literally, the bond of protection, obligation, or care, is now principally applied to this ritual. Rakhi , which the Applicant intends to manufacture, is this object which symbolises the bond of protection and is tied round the wrist of the brother. History records variations of this ritual, but whatever the variation the emphasis is to denote the bond between the protector and the person in need of protection. Notable among these variations is the tying of Rakhi s among Muslims and Hindus as a form of protest against the Partition of Bengal in 1905. Leonard Elmherst's memoir Poet and Plowman records that T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arification states that Rakhi in form of Kalava will attract NIL GST. Kalava is the sacred Hindu thread also called mauli or charadu in Hindi. It is tied by a priest or an older family member, typically grandparents or parents on the wrists of all the people attending the prayer ceremony. Cotton strings in form of yarn in full red are most common as is red with small bits of yellow. It is important to note here that:- i) Kalava is tied by a priest or senior family member during a prayer ceremony ii) a Kalava is made of Cotton Strings in the form of a yarn and iii) The colours of a Kalava are red and yellow. The Application is clear in stating that the Rakhi which are being manufactured are not always of Cotton thread. Other elements mentioned are Zari, Nylon and Silk Threads. Even these are not exhaustive. The Applicant may use other forms of material to enable the Rakhi s being tied on the wrist. The Rakhi s which are being manufactured include Decorative Rakhi , Designer Rakhi , Fancy Rakhi . This again, is not an exhaustive list of the kind of Rakhi s being manufactured. The Applicant may manufacture other variants of Rakhi too. The mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely a conglomeration of discrete materials, is clearly not classifiable under a single Tariff code. Moreover, under the GST Act the identity of an item at the point of supply is of paramount importance. In this case Rakhi appeals to the end-consumers because of its specific characteristics which gives the identity of Decorative/Designer/Fancy/Kids Rakhi 13. Serial No 92(3) of the TRU Clarification states that any other Rakhi [i.e those which are not puja samagri or in the form of Kalava] would be classified as per its constituent materials and attract GST accordingly . It is clear from Serial No 92(3) of the TRU Clarification that it is not the intention under GST to make Rakhi duty-free or non-taxable under a general clause but all other Rakhi s, i.e those which are not puja samagri or in the form of Kalava are to attract GST. It is significant that the TRU Clarification does not mention the word predominant either in material content or in determining the value of the product. All the constituent materials are to be considered of equal importance irrespective of their ratio in terms of material content and/or final value of the product. It is also cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her constituent materials undeclared in the literature submitted by them, under Rule 3(c) this Rakhi will be classifiable under Chapter 71 to 81 (depending on the metal) and attract GST accordingly. 14. The Applicant states that the intention is to supply Rakhi , including but not limited to, decorative Rakhi , Designer Rakhi , Fancy Rakhi and these Rakhi s consist of, inter alia, Cotton thread, Zari thread, Silk Thread, Nylon Thread, Glass Beads, Plastic Beads, Coloured Stones, Metal Pendants and Rudraksha. On being asked specifically whether or not the list of materials constituting the Rakhi s is a complete list, the Applicant has admitted that the list provided in the Application is not a complete list and while it more or less covers most of the materials that are being used it does not rule out the use of materials not included in the list. It is, thus, clear from the Applicant s statement that other forms of Rakhi may be manufactured and that a complete Rakhi may constitute materials other than those listed. Since the Applicant is unable to provide an exhaustive and definite list of the constituent materials of the Rakhi s which are intended to be manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, Rakhi is an independently identifiable product which may be made up of innumerable materials of no fixed or predetermined ratio, and yet retain its specific identity as a symbol of a bond involving the potential care of the sister by the brother, and not merely an assemblage of discrete materials. Rakhi cannot be termed as a handicraft item under GST under Notification No 32/2017- Central Tax dated 15.09.2017, (later amended as Notification No 38/2017-Central Tax dated 13.10.2017). It is also seen that Rakhi is not purely puja samagri as it is not an essential and integral part of any Puja or Religious Ceremony to pay obeisance to any Hindu deity, and that Rakhi has been historically used to emphasise the bond between Hindus and Muslims. Rakhi , therefore, cannot attract NIL rate of duty under Serial No 92(1) of the TRU Clarification, nor can it be considered exempt in terms of Serial no. 148 of the Exemption Notification since it is not listed therein. With reference to the list of various materials submitted along with the Application for the Rakhi s the Applicant intends to manufacture, though it is stated that the list is not an exhaustive one, and al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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