Disc brake pads and shoes classified as motor vehicle parts under Chapter 8708, attracting 28% GST rate

AAR Uttarakhand ruled that disc brake pads and shoes used in automobiles are classifiable under Chapter 8708 of GST Tariff as motor vehicle parts rather than under Chapter 6813 as friction materials. The Authority determined that since mineral substances are not the principal component and the products are dedicated for use primarily with motor vehicles of headings 8701-8705, they qualify as automobile parts. Consequently, the applicable GST rate is 28% under Chapter 8708.

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Issues Involved:
1. Classification of "Disc Brake Pads & Brake Shoes" used in automobiles.
2. Rate of applicable GST on "Disc Brake Pads & Brake Shoes".

Detailed Analysis:

1. Classification of "Disc Brake Pads & Brake Shoes":

Applicant's Submission:
The applicant, M/s Indo German Brakes (P) Ltd, sought an advance ruling on the classification of "Disc Brake Pads & Brake Shoes" under GST. They argued that these products should be classified under Chapter 6813 if the friction material is not mounted. However, they noted that their products are bonded on a metal plate, making them ineligible for classification under HSN 6813.

Conflicting Reports:
The Deputy Commissioner-II, SGST, Dehradun, suggested classification under Chapter 6813. In contrast, the Assistant Commissioner, CGST, Dehradun, recommended Chapter Head 8708.

Authority's Findings:
The Authority examined whether the products should be classified under Chapter 6813 (Friction material and articles thereof) or Chapter 8708 (Parts and accessories of motor vehicles). They noted that Chapter 6813 covers friction materials not mounted, whereas Chapter 8708 includes parts and accessories of motor vehicles.

Analysis of Materials Used:
The materials used by the applicant include Kevlar, Mineral Fibre, Cellulose, Phenolic Resin, Steel Wool, Metal Fibre, Graphite, and Barium Sulphate. The Authority observed that mineral substances are not the principal or fundamental substances in the products, thus not warranting classification under subheading 6813.

Chapter 8708 Conditions:
The Authority noted that Chapter 8708 covers parts and accessories that:
- Are identifiable as suitable for use solely or principally with motor vehicles.
- Are not excluded by the provisions of Notes to Chapter 87.
- Are not more specifically included elsewhere in the nomenclature.

Commercial Identity Test:
The Authority emphasized the commercial identity test, stating that the products are known in the market as parts of motor vehicles, not as friction materials. They concluded that the products are suitable for use solely or primarily with motor vehicles, thus classifiable under Chapter 8708.

Manufacturing Process:
The Authority detailed the manufacturing process, noting that the products are designed for specific vehicle models and marketed accordingly. They observed that the products are meant for the replacement market and are supplied to renowned brands like "Bosch India Ltd."

Conclusion on Classification:
Based on the analysis, the Authority held that "Disc Brake Pads & Brake Shoes" are appropriately classifiable under subheading 8708 of the GST Tariff as parts and accessories of motor vehicles.

2. Rate of Applicable GST:

Applicable Rate:
Since the products are classified under Chapter Heading 8708, the applicable GST rate is 28%.

Final Ruling:
The Authority ruled that "Disc Brake Pads & Brake Shoes" are to be classified under subheading 8708 of the GST Tariff, with an applicable GST rate of 28%.

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