The AAR, Kerala, in S. Radhakrishnan, M/s. Bright Metal Works [Advance Ruling No. KER/15/2023 dated April 03, 2023] ruled that the assessee is eligible to avail ITC of tax paid on inputs, input services and parts of fishing or floating vessels classifying under CTH 8902 are taxable at the rate of 5% GST and further ruled that the replacement of parts without consideration during the warranty period is not liable to GST.
Facts:
Mr S. Radhakrishnan (“the Applicant”) is a proprietor of M/s. Bright Metal Works and engaged in the manufacturing of marine propellers, stern tube set, rudder sets, SS propeller shafts, MS shafts for coupling, intermediate shafts and cutlass rubber bushes (cumulatively referred as “the Goods”) used in fishing / floating vessels.
The Applicant contended that the goods falls under Customs Tariff Heading (CTH) 8902 and accordingly attracts GST @5% as ‘parts of goods of CTH 8902’ as SI. No.252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated June 28, 2017 (“the Goods Rate Notification”).
The Applicant submitted that the goods are individually classified as follows: marine propellers-8487; rubber set for fishing boats – 7325; stem tube set for fishing boats-7304; SS Propeller shaft – 7221 and 7222; MS Shaft-7213 and attracts GST @18% as per SI. Nos. 371, 237, 218, 209 and 204 of Schedule III of the Goods Rate Notification.
The Applicant submitted that Sl. No. 252 of Schedule I the Goods Rate Notification solely depends on the nature of the use to which the commodities. Thus, the GST applicable to the goods is 5%.
The Applicant filed an application before the AAR, Kerala, seeking the clarification regarding the taxability of fishing / floating vessels.
Issues:
- Whether goods which can be individually classifiable can be classified as part of fishing / floating vessels under SI. No.252 of Schedule I the Goods Rate Notification?
- Whether replacement of parts during the warranty period constitute supply and accordingly leviable to GST?
Held:
The AAR, Kerala, Advance Ruling No. KER/15/2023 ruled as under:
- Observed that, GST rate on marine propellers, stem tube set, rudder set, SS propellers shaft, MS shaft for couplings and intermediate and cutlass rubber bushes when supplied for use as part of goods of CTH 8901, 8902, 8904, 8905, 8906 or 8907 attracts 5% GST as per entry at SI. No. 252 of the Goods Rate Notification.
- Held that, the goods falling under any chapter when supplied for use as parts of fishing or floating vessels are taxable at the rate of 5% as per entry SI. No.252 of the Goods Rate Notification.
- Further held that, the replacement of parts without consideration during the warranty period is not liable to GST because the goods are supplied with a warranty, the consideration received as part of the original supply includes the consideration for the promise to repair or replace.
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