2018 (7) TMI 142 - AAR - GST

Tax Ruling: Fishing Vessel Parts Taxed at 5% SGST/CGST vs. 18% for Other Uses

The Authority ruled that marine propellers, rudder set, stern tube set, propeller shaft, and M.S. Shaft for couplings used in fishing/floating vessels ... Classification of goods based on nature of use - parts of fishing vessels taxable at concessional rate under entry 252 of Schedule 1 - applicable rate of tax 5% for parts when used in fishing/factory vessels - general rate 18% under HSN classification - Advance Ruling on rate of taxParts of fishing vessels taxable at concessional rate under entry 252 of Schedule 1 - classification of goods based on nature of use - Whether marine propellers, rudder sets, stern tube sets, propeller shafts and M.S. shafts for couplings when used as parts of fishing/factory vessels attract the concessional tax rate under Entry 252 of Schedule 1. - HELD THAT: - Entry 247 covers fishing vessels, factory ships and other vessels for processing or preserving fishery products (HSN 8902) and Entry 252 extends to parts of goods of headings including 8902. The determinative criterion for applying Entry 252 is the nature of use of the commodity as a part of such vessels. Thus, where the commodities in question are incorporated and used solely as parts of fishing/factory vessels they fall within Entry 252 and are eligible for the concessional rate; where they are used for other purposes they remain classified by their HSN and attract the general rate. [Paras 5, 6, 7]Marine propellers, rudder sets, stern tube sets, propeller shafts and M.S. shafts for couplings used as parts of fishing/factory vessels fall under Entry 252 of Schedule 1 and are taxable at the concessional rate of 5%.General rate 18% under HSN classification - Rate of tax applicable to the stated commodities when not used as parts of fishing/factory vessels. - HELD THAT: - The commodities identified by the applicant correspond to specific HSN headings (for example, marine propellers 8487 10 00 and various metal parts under chapters 72-73). Where such commodities are not used as parts of fishing/factory vessels, their classification and applicable tax rate follow the HSN-based entries which, as specified in the application, attract the general rate of 18%. The concessional treatment under Entry 252 is therefore contingent on their use in the specified vessels. [Paras 4, 6]If the commodities are used for purposes other than as parts of fishing/factory vessels, they are taxable at the general rate of 18% as per their HSN classification.Final Conclusion: The Advance Ruling holds that the listed commodities when used as parts of fishing/factory vessels are taxable at the concessional rate of 5% under Entry 252 of Schedule 1; if used otherwise they attract the general HSN-based rate of 18%. Issues:Rate of tax applicable to marine propellers, rudder set, stern tube set, propeller shaft, and M.S. Shaft for couplings used in fishing/floating vessels.Analysis:The applicant sought an Advance Ruling on the tax rate applicable to various commodities used in fishing/floating vessels. The applicant argued that since the products are primarily used for fishing and allied activities, they should be taxed at 5% under specific entries in the Central Notification 1/17. The Authority examined the application and decided to admit it based on the contentions raised by the applicant during the personal hearing.Regarding the tax rate, the HSN specified in the application indicated an 18% tax rate for the mentioned commodities. However, it was highlighted that parts of fishing vessels and other related vessels are taxed at 5% under entry 252 of the 1st schedule of SRO 360/2017. This entry encompasses goods like fishing vessels and factory ships, indicating that the tax rate classification depends on the intended use of the commodities.The Authority determined that commodities like marine propellers, rudder set, stern tube set, propeller shaft, and M.S. Shaft for couplings used solely for fishing/floating vessels should be taxed at 5%. In contrast, if these commodities are utilized for other purposes, the tax rate applicable would be 18%. Therefore, the ruling clarified that these commodities, when part of fishing/floating vessels, fall under Entry 252 of the relevant notifications, making them subject to a 5% tax rate split between SGST and CGST.