Marine engines get 5% GST only when used as fishing vessel parts under HSN 8407, warranty replacements without payment GST-free

AAR Tamil Nadu ruled on GST rates for marine equipment and services. Marine engines under HSN 8407 attract 5% GST only when used as parts of fishing vessels under heading 8902, based on end-use. Spare parts ruling denied due to insufficient documentation. Warranty replacements without consideration don't attract GST, but combined charges with other expenses do. Post-warranty repair services ruling declined without contract details to determine composite supply nature. Puff insulated ice boxes used independently for fish preservation don't qualify as vessel parts, thus ineligible for 5% concessional rate. Defence department engine supply ruling denied due to lack of supporting documentation.

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Issues Involved:
1. Rate of tax on Marine Engines under HSN Code 8407 and its spare parts for fishing vessels (HS Code 8902).
2. GST applicability on supply of materials and labor charges during the warranty period, free of cost.
3. Rate of tax for charges towards supply of materials and labor for repair of fishing vessels (HS Code 8902).
4. Rate of tax on puff insulated ice boxes used by fishermen.
5. Rate of tax on marine engines under HSN Code 8407 supplied to Defence Department for patrol, flood relief, and rescue operations.

Issue-wise Detailed Analysis:

1. Rate of tax on Marine Engines under HSN Code 8407 and its spare parts for fishing vessels (HS Code 8902):
The applicant sought clarification on whether the 5% GST rate under Sl. No. 252 of Notification No. 01/2017-CT (Rate) dated 28.06.2017 applies to marine engines and their spare parts when used in fishing vessels. The ruling confirmed that marine engines supplied for use as part of fishing vessels under HS Code 8902 attract a GST rate of 5%, provided the end-use is established. The ruling did not extend to spare parts due to insufficient documentary evidence to substantiate their use as parts of fishing vessels.

2. GST applicability on supply of materials and labor charges during the warranty period, free of cost:
The applicant argued that no GST should be payable on materials and services supplied during the warranty period as they are provided free of cost and included in the initial sale price, which already includes GST. The ruling agreed, stating that no GST is chargeable on such replacements during the warranty period, provided no additional consideration is received. However, if any incidental expenses are combined with warranty services, GST would apply.

3. Rate of tax for charges towards supply of materials and labor for repair of fishing vessels (HS Code 8902):
The applicant contended that post-warranty repair services, where materials and labor charges are shown separately, should attract a composite supply tax rate of 5%. The ruling noted that the nature of the supply (whether composite or separate) should be determined based on the contract terms, which were not provided. Therefore, no ruling was extended due to a lack of evidence to establish the nature of the supply.

4. Rate of tax on puff insulated ice boxes used by fishermen:
The applicant requested that puff insulated ice boxes used in fishing vessels be taxed at 5% as parts of fishing vessels under entry no.252. The ruling determined that these ice boxes are used independently to keep fish fresh and do not become part of the vessels. Thus, they do not qualify for the concessional 5% GST rate and are subject to the standard rate applicable to their classification.

5. Rate of tax on marine engines under HSN Code 8407 supplied to Defence Department for patrol, flood relief, and rescue operations:
The applicant claimed that marine engines supplied to the Defence Department should also attract a 5% GST rate. The ruling could not extend a decision due to the absence of documentary evidence to substantiate the use of these engines in defense operations.

Ruling Summary:
1. Marine engines under HSN Code 8407 used in fishing vessels (HS Code 8902) are taxed at 5% GST.
2. No GST is applicable on materials and labor supplied during the warranty period, provided no additional consideration is received.
3. No ruling on the tax rate for post-warranty repair services due to insufficient evidence.
4. Puff insulated ice boxes do not qualify for the 5% GST rate and are subject to the standard rate.
5. No ruling on the tax rate for marine engines supplied to the Defence Department due to lack of evidence.

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