Marine hydraulic equipment for barges eligible for lower 5% GST rate

The authority ruled that Marine Duty hydraulic equipment and its parts designed for fitting on a barge are subject to GST at 5% (CGST 2.5% and SGST 2.5%) or IGST at 5%. The equipment is considered essential for the barge's operation and custom-manufactured, making it eligible for the lower GST rate. Additionally, the applicant can claim input tax credit for indigenous and imported inputs used in manufacturing the equipment if the GST rate is determined as 5%.

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Issues Involved:

1. Applicability of GST rate for Marine Duty hydraulic equipment.
2. Eligibility to claim input tax credit for the manufacture of said equipment.

Detailed Analysis:

Issue 1: Applicability of GST Rate for Marine Duty Hydraulic Equipment

The applicant sought clarification on whether GST @ 5% (CGST of 2.5% and SGST of 2.5%) or IGST @ 5% is applicable for Marine Duty hydraulic equipment designed and custom-built for fitting on a barge falling under Serial No. 246 of Schedule I of GST Notification No. 1/2017 dated 28th June 2017, and its parts falling under Serial No. 252 of Schedule I of the same notification.

The applicant argued that the hydraulic equipment and parts are essential for the functioning of the barge, which is used for mid-sea cargo discharge. They referenced the classification under HSN Codes 84122100 and 84798999 for Marine Duty Hydraulic Cylinders and Hydraulic Power Packs, respectively, which typically attract 18% GST. However, they contended that since these items are integral to the barge's operation, they should be taxed at 5% GST as per the relevant notification.

The concerned officer raised objections, noting that the function of the barge was not clearly ascertainable and that hydraulic cylinders are used for various purposes in the shipping world. They argued that these items could not be considered essential parts of the barge.

Upon review, the authority concluded that the Marine Duty Hydraulic Cylinders and Hydraulic Power Packs supplied by the applicant to their client for use in barges are integral to the barge's operation. These items are custom-manufactured and cannot be used elsewhere, making them essential parts of the barge. Therefore, the authority ruled that the GST rate applicable is 5% (CGST of 2.5% and SGST of 2.5%) or IGST @ 5% under Serial No. 252 of Schedule I of GST Notification No. 1/2017.

Issue 2: Eligibility to Claim Input Tax Credit

The applicant also sought clarification on whether they can claim input tax credit for indigenous and imported inputs used in manufacturing the above equipment if the GST on the equipment is determined as 5%.

The authority referred to Chapter V of the CGST Act, 2017, which contains provisions for the availment and utilization of Input Tax Credit. The authority confirmed that subject to satisfying the provisions of Chapter V, the applicant is eligible to claim input tax credit for the inputs used in manufacturing the equipment.

Conclusion:

Order:

1. Question 1: The Marine Duty hydraulic equipment designed and custom-built for fitting on a barge falling under Serial No. 246 of Schedule I of GST Notification No. 1/2017, and its parts falling under Serial No. 252 of Schedule I of the same notification, are subject to GST @ 5% (CGST of 2.5% and SGST of 2.5%) or IGST @ 5%.

2. Question 2: The applicant can claim input tax credit in respect of indigenous and imported inputs used for manufacturing the above equipment, provided the GST on the equipment is determined as 5% in terms of Notification No. 1/2017 dated 28th June 2017.

This comprehensive ruling clarifies the GST rate applicable to the specified marine duty hydraulic equipment and affirms the eligibility to claim input tax credit for the inputs used in their manufacture.

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