Fan Coil Unit (FCU) classified under HSN Code 8415, not 8418, based on HVAC function

The Authority ruled that the Fan Coil Unit (FCU) is classified under HSN Code 8415 as parts of air conditioning machines, not under HSN Code 8418 for refrigerating equipment. The decision was based on the FCU's function in HVAC systems and its circulation of water for temperature control, aligning it with air conditioning machine components.

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Issues Involved:
1. Classification of Fan Coil Unit (FCU) under the Harmonized System of Nomenclature (HSN) Code for Goods and Services Tax (GST) purposes.

Detailed Analysis:

Issue 1: Classification of Fan Coil Unit (FCU) under HSN Code 8418 or 8415

Applicant's Contention:
- The applicant, engaged in the supply of Fan Coil Units (FCU) along with standard spare parts and accessories, sought an advance ruling on whether FCU is covered under HSN Code 8418.
- FCU is described as a device consisting of a fan motor, heat exchanger, and PCB, used to control the flow of water and cool the area where installed.
- The applicant argued that FCU should be classified under HSN Code 8418 based on Notification No. 1/2017- Central Tax (Rate), Entry No. 319A, which includes "Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps (other than air conditioning machines of heading 8415)."
- Reliance was placed on the Supreme Court decision in Commissioner of Customs & Central Excise, Delhi v/s Carrier Aircon Ltd., where "Chillers" were classified under HSN Code 8418 as refrigerating equipment.

Authority's Observations:
- The Authority examined the nature and use of FCU, noting that it is a part of HVAC systems found in residential, commercial, and industrial buildings, used to control the temperature in the space where it is installed.
- FCUs circulate hot or cold water through a coil to condition a space and get their hot or cold water from a central plant or mechanical room.
- The Authority reviewed GST Tariff Heading 8418 and found that FCUs are not refrigerators, freezers, or other refrigerating or freezing equipment, nor are they heat pumps. Hence, they do not fall under HSN Code 8418.
- The Authority then examined GST Tariff Heading 8415, which includes "Air Conditioning machines, comprising a motor-driven fan and elements for changing the temperature and humidity, including machines in which the humidity cannot be separately regulated."
- The Authority concluded that FCUs, being parts of air conditioning systems, should be classified under HSN Code 8415 as parts of air conditioning machines.

Conclusion:
- The Authority ruled that the Fan Coil Unit (FCU) is not covered under HSN Code 8418. Instead, it should be classified under HSN Code 8415, which pertains to air conditioning machines.

Order:
- The question of whether the Fan Coil Unit is covered under HSN Code 8418 was answered in the negative.
- The Fan Coil Unit would be covered under HSN Code 8415.

This comprehensive analysis ensures that the classification of FCU under GST is accurately determined based on its nature, use, and relevant legal provisions.

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