2022 (10) TMI 307 - AAR - GST

Combined Wire Rope for fishing operations not eligible for 5% GST rate under vessel parts classification

In Re: M/s. Shakti Marine Electric Corporation.

AAR Gujarat ruled that Combined Wire Rope used in fishing operations is not classifiable as a part of fishing vessel under Sr.No.252 of Schedule-1 of ... Classification of goods - rate of GST - Combined Wire Rope used as a part of Fishing Vessel - Taxable at the rate of 5% in terms of Sr.No.252 of Schedule-1 of Notification No. 1/2017-CTR corresponding notification issued by Gujarat State and Notification No. 1/2017-ITR or not? Whether the Combined Wire Ropes is a part of fishing vessel or otherwise? HELD THAT:- Wire Rope is used in various fields such as Mines, Haulage, General Engineering, lift & escalators and Shipping depending upon the requirement and usage of the field. It is observed that Wire Rope is used in Shipping but in the Manual use of Wire Rope in fishing vessel have not been mentioned. This confirms that Wire Rope has no specific/general use in the fishing vessel - Combined Wire Rope is not a part of fishing vessel but it's one side is used to tie the Fishing Net and other side of Wire Rope tied on the vessel. The main use of Combine Wire Rope in fishing is to tie the fishing net with vessel. Therefore, fishermen required such wire rope for fishing purpose and the applicant supply such Combine Wire Rope to them. Further, as per the use of Combine Wire Rope it is amply clear from the above that it has no use in the fishing vessel but it is used to tie the fishing net. The application has submitted that, “it is crystal clear that without Rope, fishing net cannot be used for fishing purpose with the Fishing Vessels”. The applicant above submission itself explain that fishing net cannot be used without the Rope, it means that Wire Rope is essential for the fishing net which is used for fishing and without wire rope fishing net will not be of any use. Hence Combined Wire Rope is not the essential/integral part of fishing vessel but it is must for the fishing net - Thus, the applicant goods Combined wire Rope is not a Part of the fishing Vessel. Combined Wire Rope is not used as a part of fishing vessel and the impugned goods does not cover under entry No.252 of Schedule-I of Notification No. 1/2017-CT(Rate) dated 28-06-2017 as amended and is not eligible to GST @ 5%. Issues Involved:1. Classification of Combined Wire Rope as a part of Fishing Vessels.2. Applicability of GST rate on Combined Wire Rope used in Fishing Vessels.3. Relevance of supporting documents and previous rulings.Issue-wise Detailed Analysis:1. Classification of Combined Wire Rope as a part of Fishing Vessels:The applicant contended that Combined Wire Rope, classified under HSN code 7312, is used primarily as a part of Fishing Vessels (HSN code 8902) and should be eligible for a reduced GST rate. The applicant argued that these ropes are essential for tying fishing nets to fishing vessels, making them integral parts of the vessels.The Authority examined the technical specifications and usage of Wire Ropes as per the Bureau of Indian Standards and found that Wire Ropes are used in various fields such as Mines, Haulage, General Engineering, and Shipping, but not specifically mentioned for Fishing Vessels. The Authority concluded that Combined Wire Rope is not an essential part of Fishing Vessels but is used to tie fishing nets to the vessels, which does not qualify it as a part of the vessel itself.2. Applicability of GST rate on Combined Wire Rope used in Fishing Vessels:The applicant sought to apply a 5% GST rate under Sr. No. 252 of Schedule-I of Notification No. 1/2017-CTR, which applies to parts of goods under heading 8901, 8902, 8904, 8905, 8906, and 8907. The Authority noted that for an item to be considered a part of another, it must be essential for the completion of the final product. Since Combined Wire Rope is not used in the manufacture of Fishing Vessels and is not an integral part without which the vessel would be incomplete, it does not qualify for the reduced GST rate.3. Relevance of supporting documents and previous rulings:The applicant provided various documents, including invoices, applications for subsidies, and certificates of registry and licenses of fishing boats, to support their claim. However, the Authority found no evidence that the Combined Wire Rope is exclusively a part of fishing boats/vessels.The applicant also cited several judgments and advance rulings from different authorities. The Authority reviewed these but found them not directly applicable to the case at hand. For example, rulings related to marine engines and other parts specifically used in fishing vessels were not analogous to the use of Combined Wire Rope, which has general applications beyond fishing vessels.Conclusion:The Authority ruled that Combined Wire Rope is not used as a part of fishing vessels and does not qualify for the reduced GST rate of 5% under Sr. No. 252 of Schedule-I of Notification No. 1/2017-CT (Rate). The applicable GST rate remains 18%. This decision was based on the interpretation that the rope is used to tie fishing nets to vessels, not as an integral part of the vessels themselves.