Marine engines attract 28% GST as standalone items but 5% when supplied as fishing vessel parts under Entry 252

The Kerala AAR held that marine engines attract different GST rates depending on their intended use. When supplied as standalone items, marine engines under Customs Tariff Heading 8407 21 00 attract 28% GST. However, when supplied specifically for use as parts of fishing vessels falling under Customs Tariff Heading 8902, the engines qualify for the concessional 5% GST rate under Entry SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate), which covers parts of vessels including fishing vessels.

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Issues:
- Applicability of GST rate on marine engines of heading 8407 for fishing vessels of heading 8902
- Applicability of GST rate on spare parts of marine engines for fishing vessels of heading 8902

Analysis:

Issue 1: Applicability of GST rate on marine engines of heading 8407 for fishing vessels of heading 8902

The applicant, a cooperative federation for fishermen, sought a ruling on the GST rate for marine engines and spare parts used in fishing vessels. They argued that as per Notification No. 01/2017, marine engines supplied for fishing vessels should attract a GST rate of 5%. The jurisdictional officer did not provide any comments. The Authority examined the issue and referred to the relevant notifications. They clarified that marine engines for fishing vessels fall under Customs Tariff Heading 8902 and attract a GST rate of 5%. The ruling was supported by Circular No.52/26/2018-GST, confirming the 5% GST rate for marine engines used in fishing vessels. Therefore, the ruling stated that marine engines for fishing vessels under Heading 8902 are subject to a GST rate of 5%.

Issue 2: Applicability of GST rate on spare parts of marine engines for fishing vessels of heading 8902

The applicant also inquired about the GST rate on spare parts of marine engines used in fishing vessels. The Authority examined the relevant provisions and notifications. It was clarified that spare parts of goods falling under specific headings, including 8902, attract a GST rate of 5%. Therefore, spare parts of marine engines used in fishing vessels falling under Heading 8902 should also be taxed at a GST rate of 5%. The ruling specified that spare parts for vessels under Heading 8902 are subject to a GST rate of 5%.

In conclusion, the Authority ruled that both marine engines and spare parts supplied for use in fishing vessels falling under Customs Tariff Heading 8902 shall attract a GST rate of 5%. If these items are used for purposes other than as parts of fishing vessels, they will be taxed according to the respective Customs Tariff Headings.

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