GST Rate Ruling: Railway Parts Classification under HSN 8607

The goods in question, railway parts supplied by the applicant, were classified under HSN 8607 attracting a 5% GST rate until 29.09.2019, and revised to 12% thereafter. The ruling determined that these goods, including Couplers, Knuckle, Locks, Toggle, and Yoke, are specifically designed for railway use and should be consistently classified under HSN 8607 throughout the supply chain, ultimately reaching Indian Railways. The decision was based on the goods' exclusivity for railway purposes and their alignment with the classification criteria under heading 8607.30.

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Issues Involved:
1. Classification of goods (Couplers, Knuckle, Locks, Toggle, Yoke, etc.)
2. Applicable GST rate on the classified goods.

Issue-wise Detailed Analysis:

1. Classification of Goods:
The applicant, involved in the manufacture and supply of various steel castings, sought an advance ruling on whether certain railway parts (Couplers, Knuckle, Locks, Toggle, Yoke, etc.) should be classified under HSN 8607 (attracting 5% GST) or HSN 7325 (attracting 18% GST). The goods are supplied to M/s. Sanrok Enterprises, which then supplies them to Indian Railways. The applicant argued that these goods should be classified under HSN 8607 because:
- The final consumer is Indian Railways, and the goods cannot be used by anyone else.
- The classification should remain consistent throughout the supply chain, from manufacturer to final consumer.
- Specific entries for railway parts should override the general entry for iron castings (HSN 7325).

2. Applicant’s Interpretation of Law:
The applicant contended that:
- The goods are manufactured as per Indian Railways' specifications and are supplied exclusively for their use.
- The classification should not change at different stages of the supply chain.
- Specific entries based on usage should override general entries, citing Rule 3(a) & 2(a) of the General Rules of Interpretation of Import Tariff.
- The goods retain their physical and chemical properties even after machining, thus should not be classified under HSN 7325.
- They referenced several judgments and notifications to support their claim that the goods should be classified under HSN 8607.

3. Authority’s Discussion and Findings:
The authority examined the submissions and found that:
- The goods are identifiable as suitable solely for railway use, fulfilling the first condition for classification under HSN 8607.
- The goods are not excluded by the provisions of the Notes to Section XVII, fulfilling the second condition.
- The goods are thus classifiable under heading 8607.30, which covers parts of railway or tramway locomotives or rolling-stock.

4. Applicable GST Rate:
The applicable GST rate for the classified goods was initially 5% under Entry No. 241 of Schedule I to Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017. However, effective from 30.09.2019, the rate was revised to 12% under Entry No. 205 G of Schedule II to the same notification, as amended by Notification No. 14/2019-Central Tax (Rate) dated 30.09.2019. Additionally, no refund of unutilized input tax credit is allowed where the credit has accumulated due to a higher tax rate on inputs compared to the output supply.

Ruling:
Railway parts such as Couplers, Knuckle, Locks, Toggle, Yoke, etc., manufactured and supplied by the applicant to M/s. Sanrok Enterprises (who in turn supply to Indian Railways after assembly) are classifiable under HSN 8607. The applicable GST rate on these goods is 5% until 29.09.2019 and 12% effective from 30.09.2019, with no refund of unutilized input tax credit.

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