9911796707
TMI Blog2019 (10) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... Nungambakkam, Chennai-600006 (hereinafter called the Applicant) is a subsidiary of HP Inc headquartered in California, USA and is engaged in the import and sale of IT products primarily personal computers (i.e., desktops and laptops) and printers. They are registered under GST with GSTIN 33AAACC9862F1ZP. The applicant has sought Advance Ruling on: What is the rate of GST applicable on supply of desktops consisting of CPU, monitor, Keyboard and mouse or any combination of input/output unit? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they are registered as a private limited company under the Companies Act, 1956. They are engaged in the import and sale of IT products primarily personal computers (i.e., desktops and laptops) and printers. Desktops are nothing but personal computers designed for regular use and generally houses a CPU along with other input and output units like monitor, keyboard, mouse etc. Desktops are classified under 8471 of the Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the form of systems consisting of variable number of units. * Section 19 of the Customs Act, 1962 which provides for "Determination of duty where goods consist of articles liable to different rates of duty" states that accessories of, spare parts or maintenance and repairing implements for any article which satisfy the conditions specified in the rules made in this behalf shall be chargeable at the same rate of duty as that of the article. In view of the above they have stated that the desktops (with or without input(s) and output unit(s)) are classified/ covered under HSN 8471, which is recognized as a single product. Further description of the product under the GST notification is verbatim of the CTH 8471 and hence, all the products covered therein shall be eligible for the rate of 18%. 2.3 The Applicant has also stated that by applying Rule 3b of the General Rules of Interpretation of Import Tariff to the present case, a CPU sold along with a monitor, keyboard, mouse etc would be classifiable under the same heading, i.e. HSN 8471. They have also made reference to similar interpretation that has been adopted in Notification No. 76/2004-Cus. Dated July 26, 2004, which prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), a monitor, a keyboard and a mouse. (Source: Wildpedia). Hence, by applying the common parlance test, the supply of CPU, monitor, keyboard and mouse together would qualify as supply of "desktop". b) Manner of usage of the product: The input units like keyboard and mouse convert physical actions to input signals that the CPU can process; output units like the monitor and printer help convert electronic signals into human understandable form. Both the system units and the peripheral units play a pivotal role in each other's functionality and are required to work together for the computer system to function. Hence, without any of these units, a desktop cannot function effectively. Thus, even though the CPU, monitor, keyboard and mouse are independent units visually or to the naked eye, they are interconnected and integrated together for effective functioning of desktop. c) Manner of issuance of purchase orders and shipment to customer: The purchase order issued by the customers/ business partners is for supply of a single product at a consolidated price, therefore when the customer raises a purchase order for a desktop, the intention is to purchase a personal computer with defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to as "peripheral units". A "peripheral" is an "ancillary" device. Thus the input and output units that used to feed information into and get information from the CPU cannot qualify as the principal supply. Even from a value perspective, the CPU constitutes approximately 85% of the value of a computer. No customer would want to buy a monitor or a keyboard or a mouse and in the course of which would also buy a CPU. They had further relied on the FAQ issued by Central Board of Excise & Customs addressing the scenario where the laptop is supplied along with the laptop bag, wherein it is clarified that the rate of tax applicable will be that of the laptop. Thus even if the supply of desktop does not qualify as a "single supply", it would still qualify as a "composite supply" with the sale of CPU being the principal supply and accordingly be liable to tax at 18% as applicable for HSN 8471. They also submitted various case laws on the grounds that classification has been made on the basis of common parlance. They also submitted purchase orders, invoices, and pricelist. 3.1 The applicant was given an opportunity to be personally heard on the matter on 10.04.2019. The applicant req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Desktops and Laptops) and printers. It is seen from the sample purchase order submitted that the product is being called "Desktop with Monitor" considered as a unit with the specifications for Monitor, internal configuration of CPU, keyboard, mouse. The invoice is raised for "Desktop Computer", though each of the parts are listed with serial number as per the specification. . It is further seen that the applicant has classified under CTH 84715000.The pricelist describe the product as "HP Desktop Pro a MT (Business Tower Desktop). A separate part number is assigned to the CPU and a separate one for Monitor. There is a single recommended selling price. From the advertisement material and the price lists submitted in respect of desktops, it is seen that the model specifications include Processor description, RAM & HDD, Graphics, OS, Monitor type, etc. 4.2 In the above factual position, the issue raised and to be decided is whether the CPU along with the Monitor or other input /output units supplied by the applicant is a 'single supply' of Desktop Computer classifiable under CTH 8471 50 or is a 'Composite Supply' as defined under Section 2(30) of the CGST /TNGST Act 2017, the Principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ECEPTION APPARATUS, RECEPTION APPARATUS FOR TELEVISION, WHETHER OR NOT INCORPORATING RADIO-BROADCASTRECEIVERS OR SOUND OR VIDEO RECORDING OR REPRODUCING APPARATUS - Cathode-ray tube monitors: 8528 42 00 -- Capable of directly connecting to and designed for use with an automatic data processing machine of heading 8471 8528 49 00 -- Other - Other monitors: 8528 52 00 -- Capable of directly connecting to and designed for use with an automatic data processing machine of heading 8471 8528 59 00 -- Other - Projectors: 8528 62 00 -- Capable of directly connecting to and designed for use with an automatic data processing machine of heading 8471 8528 69 00 -- Other Chapter Note 5A to Chapter 84 reads as follows (relevant to the case at hand): 5.(A) For the purposes of heading 8471, the expression "automatic data processing machine" means machine capable of:- (i) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme; (ii) being freely programmed in accordance with the requirements of the user; (iii) performing arithmetical computations specified by the user; and (iv) exec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that function. Note 5. For the purposes of these Notes, the expression "machine" means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85. 4.4 From the above, it is evident that CTH 8471 covers 'Automatic Data Processing Machines' consisting of atleast a CPU, Keyboard and Visual Display, in the same housing or otherwise. Desktops supplied by the applicant have Central Processing Unit, motherboard memory all of which together storing the processing programme data necessary for the execution of the programme, is can be freely programmed in accordance with the requirements of the user, can perform arithmetical computations specified by the user; and executing, without human intervention, a processing programme which requires them to modify their execution, by logical decision during the processing run. As per Note 5A to Chapter 84, desktops supplied by the applicant are automatic data processing machines. The Desktops can consist of variable number of units such as keyboard, mouse monitor etc. as per Chapter Note 5B. Keyboards, mouse and monitors all qualify to be called as a unit of the automatic data processing machine as th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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