2021 (7) TMI 539 - AAR - GST

PVC Tufted Coir Mats: Not Eligible for Lower Tax Rate, Classified under Customs Tariff Item

In Re: M/s. Alleppey Fibretuft Pvt. Ltd.

The ruling clarified that PVC Tufted Coir Mats and Matting are not covered under the specified item in the Central Tax (Rate) notification, do not qualify ... Classification of goods - rate of tax - PVC Tufted Coir Mats and Matting - whether the product will attract GST at the rate of 5 % as per SI No. 219 of Schedule I or GST at the rate of 12 % as per SI No. 144 of Schedule II of N/N. 01/2017 Central Tax (Rate) dated 28.06.2017? - HELD THAT:- The Heading 5702 covers carpets and other textile floor coverings, woven, not tufted or flocked, whether or not made up including “Kelem”, “Schumacks”, “Karamanie” and similar hand-woven rugs and the sub-heading 5702 20 covers floor coverings of coconut fibres (coir) which includes coir mats, carpets and other rugs. However, the product manufactured by the applicant cannot be classified under 5702 20 as it does not include coir mattings / carpets with PVC backing. The Heading 5703 covers carpet and other textile floor coverings, tufted whether or not made up and sub-heading 5703 90 covers carpets and floor coverings of other textile material; tariff item 5703 90 20 covers carpets and other floor covering of coir and tariff item 5703 90 90 covers other carpets and floor coverings. The Heading 5705 covers other carpets and other textile floor coverings whether or not made up and hence the product of the applicant does not fall under 5705. On the basis of the descriptions of the headings and the relevant chapter notes the product of the applicant is appropriately classifiable under Tariff Sub-Heading 5703 90 90 of the Customs Tariff Act. Rate of tax - HELD THAT:- The entry at SI No. 219 of Schedule I of the notification refers to the coir mats, mattings, floor coverings etc that are exclusively made up of coir fibres. In the instant case though the exposed surface of the mats / mattings / floor coverings manufactured and supplied by the applicant are of coir, it is backed by PVC and the manufacturing process involves use of technologically advanced machines for providing the backing using PVC and the PVC and the chemicals used for the backing has equal importance as that of coir and the PVC and the chemicals influence the value of the mats and mattings more than coir - Hence the products cannot be considered to fall, under the description of Coir mats, matting, floor covering mentioned in SI No. 219 of Schedule 1 but appropriately falls within the description of Carpets and other textile floor coverings, tufted, whether or not made up mentioned in SI No. 144 of Schedule II of the Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017. SI No. 219 of Schedule I of Notification No. 01/2017 CT (Rate) dated 28.06.2017 as amended by Notification No. 34/2017 CT (Rate) dated 13.10.2017 does not cover PVC Tufted Coir mats and matting - PVC Tufted Coir Mats and Matting do not attract low band of tax rate - PVC tufted Coir mats and matting are appropriately classifiable under Customs Tariff Item 5703.90.90 and attracts GST at the rate of 12% as per entry at SI. No. 144 of Schedule II of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017. Issues Involved:1. Whether PVC Tufted Coir Mats and Matting are covered under item number (A) (xiii) in Schedule 1 - 2.5% as per Notification No.34/2017-Central Tax (Rate).2. Whether PVC Tufted Coir Mats and Matting attract a low band of tax rates as per the recommendations of the Fitment Committee and approval of the GST Council.3. Classification of PVC Tufted Coir Mats and Matting under tariff item 57039020 - Carpets and floor coverings of coir.4. Classification of PVC Tufted Coir Mats and Matting under tariff item 5703.90.90 - Of other textile material - Other.5. Classification of PVC Tufted Coir Mats and Matting under tariff item 5705.00.49 / 5705.00.90 - Carpets, carpeting, rugs, mats, and matting - Other.Detailed Analysis:1. Coverage under Notification No.34/2017-Central Tax (Rate):The applicant sought clarification on whether PVC Tufted Coir Mats and Matting are covered under item number (A) (xiii) in Schedule 1 - 2.5% as per Notification No.34/2017-Central Tax (Rate). The ruling concluded that SI No. 219 of Schedule I of Notification No. 01/2017 CT (Rate) dated 28.06.2017, as amended by Notification No. 34/2017 CT (Rate) dated 13.10.2017, does not cover PVC Tufted Coir Mats and Matting.2. Tax Rates as per Fitment Committee and GST Council:The applicant argued that PVC Tufted Coir Mats and Matting should attract a lower tax rate based on the Fitment Committee's recommendations and GST Council approval. However, the ruling clarified that these products do not attract the low band of tax rates. The Fitment Committee and GST Council recommendations for a 5% tax rate apply to goods made in the cottage sector, which does not include PVC Tufted Coir Mats and Matting due to their sophisticated manufacturing process and high investment.3. Classification under Tariff Item 57039020:The applicant suggested that PVC Tufted Coir Mats and Matting could be classified under tariff item 57039020 - Carpets and floor coverings of coir, attracting 5% GST. The ruling determined that this classification is not appropriate. The product involves significant use of PVC and chemicals, which influence the cost and quality more than coir, thus disqualifying it from being classified under this tariff item.4. Classification under Tariff Item 5703.90.90:The ruling concluded that PVC Tufted Coir Mats and Matting are appropriately classifiable under Customs Tariff Item 5703.90.90 - Of other textile material - Other. This classification attracts a GST rate of 12% (CGST - 6% + SGST - 6%) as per entry at SI. No. 144 of Schedule II of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017. The product's manufacturing process and the use of PVC backing justify this classification.5. Classification under Tariff Item 5705.00.49 / 5705.00.90:The applicant also inquired if the product could be classified under tariff item 5705.00.49 / 5705.00.90 - Carpets, carpeting, rugs, mats, and matting - Other. The ruling determined that this classification is not applicable. The product does not fall under the descriptions provided for these tariff items.Conclusion:The ruling provided the following clarifications:1. PVC Tufted Coir Mats and Matting are not covered under item number (A) (xiii) in Schedule 1 - 2.5% as per Notification No.34/2017-Central Tax (Rate).2. PVC Tufted Coir Mats and Matting do not attract the low band of tax rates.3. PVC Tufted Coir Mats and Matting cannot be classified under tariff item 57039020.4. PVC Tufted Coir Mats and Matting are classifiable under tariff item 5703.90.90 and attract a 12% GST rate.5. PVC Tufted Coir Mats and Matting cannot be classified under tariff item 5705.00.49 / 5705.00.90.