Hearing aid parts and accessories under HSN 9021 90 10 attract 18% GST under residuary entry, not exempt

AAAR Karnataka ruled on GST classification and tax rate for hearing aid parts and accessories. The appellant did not dispute classification under HSN 9021 90 10 but challenged the tax rate. The Authority held that parts and accessories of hearing aids are not exempt under Sl. No 142 of exemption notification, which covers only hearing aids under heading 9021, not their parts. Since parts and accessories under tariff item 9021 90 10 are not specifically mentioned in any exemption notification or other rate schedules, they fall under residuary entry Sl. No 453 of Schedule III, attracting 18% GST rate instead of exemption.

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

Issue-wise Detailed Analysis

1. Classification of Parts and Accessories Suitable for Use Solely with Hearing Aids
The Appellant sought a ruling on the classification of parts and accessories of hearing aids. The Authority for Advance Ruling (AAR) classified these parts and accessories under HSN 9021 90 10. The Appellant did not dispute this classification.

2. Rate of Tax on Supply of Such Parts and Accessories
The AAR ruled that the parts and accessories of hearing aids are taxable at 18% under entry No 453 of Schedule III to Notification No 01/2017 CT (Rate). The Appellant argued that the correct rate of tax should be 12% under entry No 221 of Schedule II of the Rate Notification or 5% under entry No 255A of Schedule I from 18th July 2022. However, the Appellate Authority upheld the AAR's ruling, stating that parts and accessories of hearing aids do not fall under the scope of entry No 221 of Schedule II or entry No 255A of Schedule I.

3. Applicability of GST Exemption Under Sl.No 142 of Notification No 2/2017 CT (Rate)
The Appellant contended that parts and accessories of hearing aids should be exempt from GST under Sl.No 142 of Notification No 2/2017 CT (Rate), which exempts hearing aids. They argued that the term 'heading' at the four-digit level (9021) should include all sub-headings and tariff items, thereby covering parts and accessories of hearing aids. The Appellate Authority rejected this argument, clarifying that the exclusion of hearing aids from entry No 221 of Schedule II does not imply the exclusion of parts and accessories. The Authority held that the exemption under entry No 142 is limited to hearing aids and does not extend to parts and accessories.

Additional Arguments and Findings
- The Appellant also referred to entry Sl.No 151 of the exemption notification, which exempts parts used in the manufacture of hearing aids. They argued that parts and accessories of hearing aids under HSN 9021 90 10 should be exempt under entry Sl.No 142, while generic parts used in manufacturing should be exempt under entry Sl.No 151. The Authority found no merit in this argument, stating that entry Sl.No 151 applies to parts used in manufacturing, not to parts and accessories used solely with hearing aids.
- The Appellate Authority emphasized that the description of goods in the GST rate notification should be read along with the Customs Tariff Act, including the Section and Chapter Notes and General Explanatory Notes. The Authority concluded that parts and accessories of hearing aids under tariff item 9021 90 10 are not covered under any specific exemption or lower tax rate entry and thus fall under the residual entry No 453 of Schedule III, attracting an 18% GST rate.

Conclusion
The Appellate Authority upheld the AAR's ruling that parts and accessories of hearing aids are taxable at 18% under entry No 453 of Schedule III to Notification No 01/2017 CT (Rate) and are not exempt under entry No 142 of Notification No 2/2017 CT (Rate). The appeal filed by the Appellant was dismissed on all accounts.

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