Marine cables not integral parts of warships, ineligible for reduced GST rate

The ruling determined that the marine pressure tight and non-pressure tight cables supplied for use in warships by M/s. Apar Industries Ltd. do not qualify as integral parts of warships. As a result, the applicant is not eligible for the reduced GST rate of 5% under Entries 250 and 252 of Schedule-I of Notification No.01/2017-Integrated Tax (Rate) dated 28.06.2017, and the applicable GST rate remains at 18%.

---

---

Issues Involved:
1. Determination of the correct GST rate applicable to marine pressure tight and non-pressure tight cables supplied for use in warships.
2. Interpretation of the term "parts of goods" under the relevant GST notification.
3. Examination of whether the supplied cables qualify as integral parts of warships.

Issue-wise Detailed Analysis:

1. Determination of the correct GST rate applicable to marine pressure tight and non-pressure tight cables supplied for use in warships:

The applicant, M/s. Apar Industries Ltd., sought an advance ruling to confirm whether the marine pressure tight and non-pressure tight cables supplied to the Defence Machinery Design Establishment (DMDE) for use in warships qualify for a concessional GST rate of 5% under Entries 250 and 252 of Schedule-I of Notification No.01/2017-Integrated Tax (Rate) dated 28.06.2017. The general GST rate for such cables under Chapter Heading No.8544 is 18%.

The applicant argued that these cables are essential and integral parts of warships, thus qualifying for the reduced GST rate. They provided an End User Certificate from the Rear Admiral of the Indian Navy certifying the intended use of the cables in warships.

2. Interpretation of the term "parts of goods" under the relevant GST notification:

The notification in question includes two relevant entries:
- Entry No.250: "Other vessels, including warships and lifeboats other than rowing boats" with a GST rate of 5%.
- Entry No.252: "Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907" with a GST rate of 5%.

To determine if the supplied cables qualify as "parts of goods," the ruling examined the definition of "parts." The term "part" is not defined in GST law, so the common parlance meaning was considered, which is "a separate piece of something or a piece that combines with other pieces to form the whole of something."

3. Examination of whether the supplied cables qualify as integral parts of warships:

The ruling referenced various judicial precedents to understand what constitutes a "part." The key test is whether the item is an integral component necessary for the existence or completion of the whole article (in this case, a warship).

The ruling noted that essential parts of a ship include items like the anchor, hull, mast, rudder, engines, and propeller, without which a ship cannot be imagined to exist or be complete. Additional equipment required for statutory compliance or safety, such as walkie-talkies, life jackets, and furniture, are not considered integral parts.

The applicant failed to provide sufficient details to prove that the marine pressure tight and non-pressure tight cables are integral parts of warships. Specifically, the ruling required information on:
- The definition and specific use of the cables.
- The exact part of the warship where these cables are used.
- Whether these cables are solely used in warships.
- The purpose these cables serve and why they are essential for the warship's existence or completion.

The End User Certificate provided by the Rear Admiral did not explicitly state that the cables are integral parts of the warship without which the warship would not exist or be complete.

Conclusion:

The ruling concluded that the marine pressure tight and non-pressure tight cables supplied by the applicant do not qualify as integral parts of warships. Therefore, the applicant is not eligible for the reduced GST rate of 5% under Entries 250 and 252 of Schedule-I of Notification No.01/2017-Integrated Tax (Rate) dated 28.06.2017. The applicable GST rate remains 18%.

Ruling:

The applicant M/s. Apar Industries Ltd., Valsad, is not eligible to avail the benefit of GST @5% as per Entries 250 and 252 of Schedule-I of Notification No.01/2017-Integrated Tax (Rate) dated 28.06.2017.

---