GST Rate for Marine Engines in Fishing and Defense Vessels Clarified by Court Decision

The case addressed the GST rate applicable to marine engines and spare parts supplied for use in fishing vessels and for defense, patrolling, flood relief, and rescue operations. The court ruled that marine engines and their parts used in fishing vessels fall under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate), attracting a 5% GST rate. Similarly, marine engines and parts supplied for ships/vessels under specific HSN codes for defense and related operations also qualify for the 5% GST rate under the same notification, excluding goods not meeting the criteria of "parts of marine engines."

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Issues Involved:

1. Whether GST rate of 5% can be charged on the supply of marine engines and their spare parts based on their ultimate use as part of fishing vessels.
2. Whether GST rate of 5% can be charged on the supply of marine engines and their spare parts when supplied for defense, patrolling, flood relief, and rescue operations.

Issue-wise Detailed Analysis:

1. GST Rate on Marine Engines for Fishing Vessels:

The applicant, M/s Ocean Blue Boating Pvt Ltd, imports marine propulsion engines (HSN 8407, 8408) and spare parts (HSN 8409) and supplies them for use in fishing vessels, police, defense, patrol, flood relief, and rescue operations. They sought clarification on whether these supplies could be taxed at a reduced GST rate of 5% under Sr. No. 252 of Notification No. 1/2017-Central Tax (Rate), dated 28-06-2017, based on their ultimate use in fishing vessels classified under HSN 8902.

Observations:

- The marine engines are imported under HSN Codes 8407/8408, and spare parts under HSN Code 8409.
- Fishing vessels fall under HSN 8902, and parts of these vessels attract a GST rate of 5% as per Sr. No. 252 of Notification No. 01/2017-C.T (Rate).
- Circular No. 52/26/2018-GST dated 09.08.2018 clarifies that parts of fishing vessels under HSN 8902, including marine engines under HSN 8408, attract a 5% GST rate.
- The authority referred to a previous ruling in the case of M/s MAN Energy Solutions India Private Limited, which held that marine diesel engines and parts thereof used in goods under HSN 8901, 8902, 8904, 8905, 8906, 8907 qualify for the reduced GST rate.

Conclusion:

Marine engines (HSN 8407, 8408) and their parts (HSN 8409) supplied for use in fishing vessels (HSN 8902) are covered under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate), attracting a GST rate of 5%.

2. GST Rate on Marine Engines for Defense, Patrolling, Flood Relief, and Rescue Operations:

The applicant also queried whether the 5% GST rate applies when marine engines and spare parts are supplied for defense, patrolling, flood relief, and rescue operations under HSN 8901, 8904, 8905, 8906, 8907.

Observations:

- The reasoning applied to the first issue is also applicable to this query.
- Marine engines and parts thereof will be covered under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate) when used in the manufacture of goods falling under HSN 8901, 8902, 8904, 8905, 8906, 8907.

Conclusion:

GST rate of 5% can be charged on the supply of marine engines (HSN 8407, 8408) and their parts (HSN 8409) when supplied for use in ships/vessels under HSN 8901, 8902, 8904, 8905, 8906, 8907, which may be used for defense, patrolling, flood relief, and rescue operations. Goods not conforming to "parts of marine engines" will not be covered under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate).

Order:

1. Marine engines (HSN 8407, 8408) and their parts (HSN 8409) used in fishing vessels (HSN 8902) attract 5% GST under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate).
2. Marine engines (HSN 8407, 8408) and their parts (HSN 8409) supplied for use in ships/vessels under HSN 8901, 8902, 8904, 8905, 8906, 8907, for defense, patrolling, flood relief, and rescue operations, attract 5% GST under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate). Goods not conforming to "parts of marine engines" are excluded.

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