Bus air-conditioning systems sold as complete units classify under GST heading 8415.20.10 regardless of separate pricing

AAR Karnataka ruled on classification of bus air-conditioning systems under GST. Complete system with rooftop unit, compressor and installation kit sold as single product to one customer for consolidated price classifies under heading 8415.20.10. When same components supplied to single customer for single fitting but with separately negotiated prices, classification remains 8415.20.10 as it constitutes composite machine. Individual components or combinations (except compressor) classify as parts under 8415.90.00. Compressor sold individually classifies under 8414.80.11 per Section XVI Note 2(a) requirements.

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Issues Involved:
1. Classification of Bus air-conditioning system inclusive of Rooftop unit, compressor, and installation kit for one consolidated price to a single customer.
2. Classification of Rooftop unit, compressor, and installation kit sold to a single customer for a single fitting at customer end, but price negotiated and agreed separately for each unit.
3. Classification of Rooftop unit, compressor, and installation kit sold individually or in various combinations.

Detailed Analysis:

1. Classification of Bus air-conditioning system inclusive of Rooftop unit, compressor, and installation kit for one consolidated price to a single customer:

The applicant supplies a complete bus air-conditioning system, which includes a Rooftop unit, compressor, and installation kit, as a single product for a consolidated price to a single customer. According to the Customs Tariff Act 1975, Chapter 84 covers machinery and mechanical appliances, and heading 8415 specifically covers air conditioning machines used for persons in motor vehicles. Heading 8415 20 covers air conditioning machines of a kind used for persons in motor vehicles, and heading 8415 2010 covers such machines for buses. Therefore, the bus air-conditioning system comprising the Rooftop unit, compressor, and installation kit, supplied as a single product for a consolidated price, merits classification under heading 8415 20 10.

2. Classification of Rooftop unit, compressor, and installation kit sold to a single customer for a single fitting at customer end, but price negotiated and agreed separately for each unit:

In this scenario, the applicant supplies the bus air-conditioning system comprising all three major components (Rooftop unit, compressor, and installation kit) for a single fitting at the customer end, but the prices of individual components are negotiated and agreed upon separately. According to Notes 2 to 5 of Section XVI of the Customs Tariff Act 1975, composite machines consisting of individual components intended to contribute together to a clearly defined function are to be classified in the heading appropriate to that function. Thus, when the Rooftop unit, compressor, and installation kit are supplied together to a single customer for a single fitting, it amounts to the supply of a composite machine designed for the purpose of performing the principal function of a bus air-conditioning system. Therefore, such supply is classifiable under tariff heading 8415 20 10.

3. Classification of Rooftop unit, compressor, and installation kit sold individually or in various combinations:

When the Rooftop unit, compressor, and installation kit are sold individually or in combinations, they are classified as parts of the composite machine (bus air-conditioning system). According to the Customs Tariff Act 1985, Rooftop units and installation kits are not individually classified but are recognized as parts of the composite machine. Therefore, these items, whether sold individually or in combinations, merit classification under heading 8415.90.00, which covers parts of air conditioning machines.

Classification of Compressor Sold Alone:

The air or gas compressor used in air-conditioning equipment is classified under tariff heading 8414, specifically 8414 80 11 for gas compressors of a kind used in air-conditioning equipment. According to Note 2(a) of Section XVI, parts that are goods included in any of the headings of Chapter 84 or 85 are to be classified in their respective headings. Therefore, the compressor sold alone merits classification under tariff heading 8414 80 11.

RULING:

a. The Bus air-conditioning system inclusive of Rooftop unit, compressor, and installation kit for one consolidated price to a single customer merits classification under heading 8415 20 10.

b. The Rooftop unit, compressor, and installation kit sold to a single customer for a single fitting at the customer end, but price negotiated and agreed separately for each unit, also merit classification under heading 8415 20 10.

c. The Rooftop unit or installation kit sold individually or in combinations thereof merit classification under heading 8415.90.00. These combinations include:
- Rooftop unit alone
- Rooftop unit and compressor
- Installation Kit
- Compressor and installation kit
- Rooftop unit and installation kit
- Rooftop unit and compressor

The compressor sold alone merits classification under tariff heading 8414 80 11.

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