Classification of Desktop Components for GST: Implications of Single Supply and Applicable Rates

In Re: M/s. HP India Sales Private Limited

In Re: M/s. HP India Sales Private Limited - 2019 (29) G. S. T. L. 756 (A. A. R. - GST) Issues Involved:
1. Classification of desktops consisting of CPU, monitor, keyboard, and mouse.
2. Determination of the applicable GST rate for the supply of desktops.

Issue-Wise Detailed Analysis:

1. Classification of Desktops Consisting of CPU, Monitor, Keyboard, and Mouse:
The applicant, engaged in the import and sale of IT products, sought to determine the classification of desktops comprising CPU, monitor, keyboard, and mouse. The applicant argued that these components together constitute a single supply of a desktop computer, classifiable under HSN 8471. They referenced various legal precedents and the Customs Tariff Act, 1962, which classifies desktops under CTH 8471. The applicant emphasized that under the GST regime, the description of goods follows the customs tariff heading, and hence, desktops should be classified under CTH 8471 50.

The applicant provided detailed explanations, including the common parlance understanding of a "desktop," which includes a CPU, monitor, keyboard, and mouse. They argued that these components are interconnected and essential for the effective functioning of a desktop computer. The applicant also mentioned that the manner of issuance of purchase orders, shipment, and marketing supports the classification of these components as a single supply.

The authority examined the relevant section and chapter notes of the Customs Tariff Act, 1975, and found that CTH 8471 covers "Automatic Data Processing Machines" consisting of at least a CPU, keyboard, and visual display. The authority concluded that desktops supplied by the applicant, including the CPU, monitor, keyboard, and mouse, are classified under CTH 8471 as a single supply.

2. Determination of the Applicable GST Rate for the Supply of Desktops:
The applicant contended that the supply of desktops should be taxed at 18% GST, as per Sl.No. 360 of Schedule-III of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. They argued that even if the supply is not considered as a single supply, it would qualify as a "composite supply" with the CPU being the principal supply, thereby attracting the same GST rate.

The authority reviewed the rate schedules and confirmed that CTH 8471 is specified at Sl.No. 360 of Schedule-III of Notification No. 01/2017-C.T. (Rate), which prescribes a GST rate of 9% CGST and 9% SGST. The authority ruled that the applicable rate of GST for desktops consisting of CPU, monitor, keyboard, and mouse, classified under CTH 8471, is 9% CGST and 9% SGST if all units are supplied together in a single supply.

Ruling:
The rate of GST applicable on the supply of desktops consisting of CPU, monitor, keyboard, and mouse, classifiable under CTH 8471, is taxable at 9% CGST as per Notification No. 01/2017-C.T. (Rate) dated 28.06.2017 and 9% SGST under Notification No.II (2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017, provided all units are supplied together in a single supply.