2023 (4) TMI 540 - AAR - GST

Mattresses supplied to government school hostels liable to IGST at 18% under HSN 940429

AAR TN ruled that mattresses classified under HSN 940429 supplied to government school hostel students and educational institution hostels are liable to ... Classification of supply - rate of IGST - supply of Mattress to Hostel students of Government Schools, Educational Institutions of Government of Karnataka, Department of Social Welfare - supply of Mattress to any Hostel of Educational Institutions - HELD THAT:- Perusal of Notification No.02/2017 IT (Rate) dated 28.06.2017 reveals no exemption available for HSN 9404, leave alone supplies to hostel students of Government educational institutions - The applicant has merely mentioned Schedule III as applicant's interpretation of law and/or facts. Schedule III of the Act provides various activities or transactions which shall be treated neither as a supply of goods nor a supply of services, wherein the goods supplied by applicant, on which clarification is sought by the applicant, is not found mentioned. It is pertinent to note that Notification No.02/2017 IT (Rate) dated 28.06.2017 providing exemption for inter-state supply of goods and Notification No. 1/2017 I.T (Rate) dated 28.06.2017 providing effective rate of tax for inter-state supply of goods, have not provided any exemption or concessional rate of IGST based on end use of Mattresses. Mattresses, classified by the applicant under HSN 940429, supplied by the applicant in the State of Tamil Nadu to hostel students of Government Schools, educational institutions of Government of Karnataka under Department of Social Welfare, through M/s Coir Industrial Co-operative Society Limited is liable to IGST @ 18% vide serial number 438 under Schedule III of Notification No.01/2017 I.T (Rate) dated 28.06.2017, as amended by Notification No.43/2017 I.T (Rate) dated 14.11.2017 - Mattresses, classified by the applicant under HSN 940429, supplied by the applicant in the State of Tamil Nadu to any hostel of educational institutions in other State is liable to IGST @ 18% vide serial number 438 under Schedule III of Notification No.01/2017 I.T (Rate) dated 28.06.2017, as amended by Notification No.43/2017 I.T (Rate) dated 14.11.2017. ISSUES PRESENTED AND CONSIDERED 1. Whether IGST @18% is applicable on inter-state supply of mattresses (HSN 940429) supplied to hostel students of Government schools/educational institutions run by a State government through an intermediary cooperative society. 2. Whether IGST @18% is applicable on inter-state supply of mattresses (HSN 940429) supplied to any hostel of educational institutions in another State (i.e., whether end-use by students or educational institutions attracts any exemption or concessional rate). ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2 (treated together): Applicability of IGST on inter-state supply of mattresses (HSN 940429) to hostels of educational institutions, including Government school hostels, when supplied through an intermediary. Legal framework: - GST Act (Chapter XVII provisions on Advance Ruling; Sections 97, 98, 100, 103, 104 referenced for binding effect, but tax liability determined under IGST/Rate notifications). - Notification providing IGST/IGST rates and exemptions for inter-state supplies (Notification No.1/2017 I.T.(Rate) and Notification No.02/2017 I.T.(Rate) as described): Schedule III SI No.438 lists Chapter/heading 9404 at 18%. - Schedule III of the Act (activities/transactions neither supply of goods nor supply of services) referenced by applicant but found inapplicable to mattresses at issue. Precedent treatment: - No judicial precedents are cited in the record. The Authority relies on statutory notifications and explanatory classification rather than case law. Therefore, no precedents are followed, distinguished, or overruled. Interpretation and reasoning: - Classification: Applicant classifies mattresses under HSN 940429 which falls within Chapter 9404. The Authority accepts this classification for rate determination. - Nature of supply: Supplies were made from Tamil Nadu to recipients in Karnataka; therefore the supply is inter-state and governed by IGST. - Invoice/flow: Invoices were issued to a cooperative society (buyer) with goods shipped to educational institutions/hostels; legal incidence for rate is determined by classification and applicable notification, not by ultimate end-use when no notification exempts such end-use. - Rate notifications: Notification No.01/2017 I.T.(Rate) (as amended) lists mattresses under SI No.438, Chapter 9404, attracting 18% IGST. Notification No.02/2017 I.T.(Rate) (exemptions) does not provide any exemption for HSN 9404 nor for supplies to hostels or students. - Schedule III invocation: Applicant's reliance on Schedule III is inapposite because Schedule III lists activities/transactions that are neither supply of goods nor services; mattresses supplied are clearly goods and not enumerated in Schedule III exceptions. - End-use exception/concession: Neither the rate notification nor the exemption notification contains any provision granting concessional rate or exemption based on end-use (i.e., supply to students or educational institutions/hostels), nor on supplies routed through intermediaries such as cooperative societies. Ratio vs. Obiter: - Ratio: The authoritative determination (binding reasoning) is that inter-state supplies of mattresses classified under HSN 940429 are taxable under IGST at 18% per SI No.438 of Schedule III of Notification No.01/2017 I.T.(Rate) as amended; absence of any notification-based exemption for such supplies means no concessional rate applies based on recipient being a government educational institution, hostel, or student end-user. This constitutes the ratio deciding the tax liability. - Obiter: Observations regarding the applicant's administrative control, absence of pending proceedings, and procedural remarks about hearings are incidental and not material to the tax rate determination. Conclusions: - Inter-state supplies of mattresses classified under HSN 940429, whether supplied to hostel students of Government schools/educational institutions or to any hostel of educational institutions in another State, are liable to IGST at 18% as per SI No.438 under Schedule III of Notification No.01/2017 I.T.(Rate) dated 28.06.2017 (as amended). - No exemption or concessional IGST rate is available based on end-use by students or educational institutions, nor on supplies routed through an intermediary cooperative society, because Notification No.02/2017 I.T.(Rate) and Notification No.01/2017 I.T.(Rate) contain no such provision. - Applicant's reference to Schedule III of the Act does not affect the classification or rate applicability because the goods in question are not included in Schedule III exceptions.