2021 (7) TMI 533 - AAR - GST

GST Rulings on Marine Engines and Parts for Vessels: Key Tax Rates and Considerations

In Re: M/s. South Indian Federation of Fishermen Societies

The court ruled that marine engines and spare parts supplied for use in vessels under heading 8902 attract GST at 5%. Supply of goods or services during ... Classification of goods - rate of GST - marine engines and its spare parts - classifiable under general tax rate as per the entry of Schedule I, SI.No.252 of GST Act dated 28-06-2017, being the part of fishing vessel of heading 8902? - levy of GST - supply of materials and labour charges incurred during warranty period at free of cost on fishing vessels presented for repair works - Sch. No.I, Sl.No.252 of GST Act dtd.28-06-2017 - Rate of tax on puff insulated iceboxes produced by SIFFS and used by traditional fishermen at their fishing vessels for the purpose of reducing fish spoilage and maintaining good hygiene - rate of tax on marine engine, when it is supplied to defence department, patrol, flood relief and rescue operations. The rate of GST applicable to marine engines falling under Customs Tariff Heading 8407 and its spare parts when supplied for use as part of fishing vessels - HELD THAT:- Fishing vessels, factory ships and other vessels for processing or preserving fishery products fall under Customs Tariff Heading 8902 and is liable to GST at the rate of 5% as per entry at SI No. 247 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017. However, as per entry at SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017 parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 falling under any chapter of the Customs Tariff attracts GST at the rate of 5 %. Therefore, if the marine engines are supplied for use as part of fishing vessel falling under Customs Tariff Heading 8902, then the marine engine as part of fishing vessel will only attract GST at the rate of 5% as per the entry at SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017 - If it is supplied for use other than as parts of fishing vessels as stated above, GST at the rate applicable under the respective Customs Tariff Headings in which they are classified, will apply. Whether GST is applicable for the free supply of materials and labour incurred during repair works within warranty period to the fishing vessels supplied by them? - HELD THAT:- The consideration received for the original supply includes the consideration for promise to repair or replace. Hence separate consideration is not charged for warranty repairs I replacement. The supply of goods and services for warranty repairs I replacement is incidental to the original supply and the value of supply made earlier includes the charges for the warranty supply also. Therefore, the supply of goods or services or both during warranty period without consideration in discharge of the warranty obligation is not liable to GST. However, if any additional consideration is received in respect of such supplies of goods or services or both it will be liable to GST at the rate applicable for the goods I services as per the rate schedule. Whether GST rate of 5% can be applied for supply of materials and service for maintenance or repair works of fishing vessels of Heading 8902? - HELD THAT:- In view of the clarification of the CBIC in Circular No. 47/21/2018 - GST dated 08.06.2018 in cases where contract of supply of repair or maintenance specifies that the spare parts and services are to be separately charged and the value of such spare parts and services supplied are shown separately, the spare parts and the services shall attract GST respectively at the rates applicable to such spare parts and service as per the GST rate schedule as the supply of the spare parts and repair service are distinct and separately identifiable. In such cases the spare parts being supplied for use as part of fishing vessels will attract GST at the rate of 5% as per entry at SI No. 252 of Schedule I of N/N. 01/2017 Central Tax (Rate) dated 28.06.2017 and the services will be liable to GST at the rate of 18% as per SI No. 25 (ii) of the N/N. 11/2017 Central Tax (Rate) dated 28.06.2017. The rate of GST applicable for Puff insulated iceboxes manufactured by the applicant and used in fishing vessels for the purpose of reducing fish spoilage and maintaining good hygiene - HELD THAT:- The puff insulated ice boxes are appropriately classifiable under Customs Tariff Heading 3923 10 30 - Articles for the conveyance or packing of goods, made of plastics - Boxes, cases, crates and similar articles - Insulated ware. The articles falling under Customs Tariff Head 3923 are liable to GST at the rate of 18% as per entry at SI No. 108 of Schedule III of N/N. 01/2017 Central Tax (Rate) dated 28.06.2017. The ice box is used in the fishing vessels for storage of fish to reduce spoilage and to maintain freshness of fish during conveyance - The product cannot be considered as a part of fishing vessel falling under Customs Tariff Heading 8902 and hence is not eligible for the concessional rate of GST as per entry at SI No. 252 of Schedule I of N/N. 01/2017 Central Tax (Rate) dated 28.06.2017. The rate of GST applicable to marine engines of Heading 8407 when it is supplied to defence department, patrol, flood relief and rescue operations - HELD THAT:- The vessels used by the Defence and other agencies for patrol, relief and rescue operations fall under Customs Tariff Heading 8906 - Other vessels including warships and lifeboats other than rowing boats. As per entry at SI No. 252 of Schedule I of N/N. 01/2017 Central Tax (Rate) dated 28.06.2017 parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 falling under any chapter of the Customs Tariff attracts GST at the rate of 5 %. Therefore if the marine engines are supplied for use as part of vessel falling under Customs Tariff Heading 8906, which are used by the Department of Defence and other agencies for patrol, relief and rescue operations then the marine engine as part of such vessel will only attract GST at the rate of 5%. Issues Involved:1. GST rate on marine engines of heading 8407 and its spare parts for fishing vessels.2. GST applicability on free supply of materials and labor during warranty period for fishing vessels.3. GST rate on supply of materials and service charges for repair and maintenance of fishing vessels.4. GST rate on puff insulated iceboxes produced by SIFFS.5. GST rate on marine engines of heading 8407 supplied to defense, patrol, flood relief, and rescue operations.Detailed Analysis:1. GST Rate on Marine Engines of Heading 8407 and Its Spare Parts for Fishing Vessels:The marine engines classified under Customs Tariff Heading 8407 21 00 attract a GST rate of 28% as per entry at SI No. 114 of Schedule IV of Notification No. 01/2017 Central Tax (Rate). However, parts of goods under headings 8901, 8902, 8904, 8905, 8906, 8907 attract a GST rate of 5% as per entry at SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate). Therefore, marine engines supplied for use as part of fishing vessels under heading 8902 attract GST at 5%. This is further clarified by CBIC Circular No. 52/26/2018-GST dated 09.08.2018, which states that marine engines for fishing vessels falling under tariff item 8408 10 93 attract 5% GST.2. GST Applicability on Free Supply of Materials and Labor During Warranty Period for Fishing Vessels:The supply of goods and services during the warranty period is incidental to the original supply, and the value of the original supply includes charges for warranty supply. Therefore, the supply of goods or services during the warranty period without consideration is not liable to GST. However, any additional consideration received for such supplies will be liable to GST at the applicable rate.3. GST Rate on Supply of Materials and Service Charges for Repair and Maintenance of Fishing Vessels:The repair or maintenance services of fishing vessels involve a composite supply of goods and services. The predominant element of the supply is the service of repair or maintenance, classifiable under SAC 998714, liable to GST at 18% as per SI No. 25 (ii) of Notification No. 11/2017 Central Tax (Rate). However, if the contract specifies separate charges for spare parts and services, the spare parts supplied for use as part of fishing vessels will attract GST at 5%, and the services will attract GST at 18%.4. GST Rate on Puff Insulated Iceboxes Produced by SIFFS:The puff insulated iceboxes fall under Customs Tariff Heading 3923 10 30 and are liable to GST at 18% as per entry at SI No. 108 of Schedule III of Notification No. 01/2017 Central Tax (Rate). These iceboxes, used in fishing vessels for reducing fish spoilage, cannot be considered as part of fishing vessels under heading 8902 and are not eligible for the concessional GST rate of 5%.5. GST Rate on Marine Engines of Heading 8407 Supplied to Defense, Patrol, Flood Relief, and Rescue Operations:Marine engines supplied for use as part of vessels under Customs Tariff Heading 8906, which includes warships and vessels used for patrol, relief, and rescue operations, attract GST at 5% as per entry at SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate).Ruling:1. Marine engines and spare parts supplied for use in vessels under heading 8902 attract GST at 5%. If supplied for other uses, the applicable GST rate under the respective headings will apply.2. Supply of goods or services during the warranty period without consideration is not liable to GST. Additional consideration received for such supplies will be liable to GST.3. Maintenance and repair services of fishing vessels are liable to GST at 18%. If spare parts and services are separately charged, spare parts attract GST at 5%, and services at 18%.4. Puff insulated iceboxes fall under heading 3923 and are liable to GST at 18%.5. Marine engines supplied for use in vessels under heading 8906 attract GST at 5%.