Parts and accessories of hearing aids taxable at 18% GST, cannot claim exemption under entry 142

AAR Karnataka ruled that parts and accessories of hearing aids are classifiable under heading 9021 9010, not 9021 40 which covers only hearing aids. The authority determined that exemption entry 142 applies solely to hearing aids as described in column (3), not to all goods under the corresponding tariff heading. Parts and accessories cannot claim GST exemption and are taxable at 18% under Schedule III entry 453, while hearing aids themselves attract 12% GST under Schedule II entry 221.

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Issues Involved
1. Classification of parts and accessories suitable for use solely with hearing aids.
2. Rate of tax on supply of such parts and accessories.
3. Exemption applicability of parts and accessories under Sl.No.142 of Notification 2/2017-CT(R).

Detailed Analysis

1. Classification of Parts and Accessories Suitable for Use Solely with Hearing Aids
The applicant is engaged in trading hearing aids and their parts and accessories, which are imported from their parent company. They sought an advance ruling on the classification of these parts and accessories, arguing that they should be classified under heading 9021 9010, as they are designed solely for use with hearing aids. The applicant referenced Note 2 to Chapter 90 of the Customs Tariff Act, 1975, which provides rules for classifying parts and accessories. According to Note 2(b), parts and accessories suitable for use solely or principally with a particular kind of machine or apparatus should be classified with that machine or apparatus. The applicant contended that since these parts and accessories are suitable only for hearing aids, they should be classified under heading 9021, which pertains to hearing aids.

2. Rate of Tax on Supply of Such Parts and Accessories
The applicant initially charged 18% GST on these parts and accessories, classifying them under heading 9021 9010 as per entry No.453 of Schedule III to Notification 1/2017-CT(R). However, they argued that these parts and accessories should be exempt from GST under Sl.No.142 of 2/2017-CT(R), which exempts hearing aids from GST. They referenced various entries and notes in the Customs Tariff Act and GST notifications to support their claim that the parts and accessories should be classified along with hearing aids and thus be exempted from GST.

3. Exemption Applicability of Parts and Accessories Under Sl.No.142 of Notification 2/2017-CT(R)
The Authority for Advance Rulings (AAR) examined the applicant's submissions and the relevant legal provisions. They noted that the parts and accessories of hearing aids are specifically covered under heading 9021 9010. According to Note 2(a) to Chapter 90, parts and accessories that are goods included in any of the headings of Chapter 90 are to be classified in their respective headings. Therefore, the parts and accessories of hearing aids should be classified under heading 9021 9010. The AAR also clarified that the Circular No.113/32/2019-GST, which the applicant referenced, is not applicable in this case because it pertains to parts of ophthalmic equipment, which do not have a separate tariff heading, unlike parts and accessories of hearing aids.

The AAR further examined the applicability of entry No.142 of Notification 2/2017-CT(R) and concluded that this entry covers only "hearing aids" and not their parts and accessories. Therefore, the exemption provided under this entry does not apply to the parts and accessories of hearing aids. The relevant entries for parts and accessories of hearing aids are entry No.221 of Schedule II (which excludes hearing aids) and entry No.453 of Schedule III (which covers goods not specified in other schedules and attracts 18% GST).

Ruling
a) The parts and accessories of hearing aids are classified under heading 9021 9010.
b) The applicable GST rate on these parts and accessories is 18% as per entry No.453 of Schedule III to Notification 1/2017-CT(R).
c) Entry No.142 of Notification 2/2017-CT(R) does not apply to the parts and accessories of hearing aids, and thus, they are not exempt from GST.

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