Industrial equipment rental with operators taxed at GST rates matching underlying goods under Notification 11/2017

The AAR-Telangana ruled on GST classification for rental/leasing charges of industrial equipment provided with operators. The Authority determined that such services fall under sub-entry (viia) of entry 17 of Notification 11/2017, requiring GST rates to match those applicable to the underlying goods. Accordingly, equipment under HSN 84151090 attracts 28% GST (14% CGST + 14% SGST), HSN 84798920 attracts 12% GST (6% CGST + 6% SGST), and HSN 84145930 attracts 18% GST (9% CGST + 9% SGST).

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Issues involved: Determination of applicable GST tax rate on rental/leasing charges for industrial equipment provided with an operator falling under specific HSN codes.

Summary:
The applicant, M/s. Ventair Engineers, sought clarification on the GST tax rate applicable to their rental/leasing services for industrial equipment under certain HSN codes. The company faced objections from customers and the Naval Dock Yard, Visakhapatnam, regarding the tax rate being charged, leading to a conflict and potential loss of business. The company's major activity involves the manufacture of machinery and equipment, specifically refrigerating or freezing equipment for industrial use.

Questions Raised:
The primary question raised was regarding the applicable GST tax rate on rental/leasing charges for industrial equipment under specific HSN codes: 84151090, 84798920, 84145930.

Discussion & Findings:
The Authority analyzed the relevant provisions and found that the rental/leasing services provided by the applicant fell under a specific sub-entry of the notification. The tax rates for the services were determined based on the applicable rates for the supply of similar goods. The HSN codes under consideration were examined to ascertain the correct tax rates applicable to each category of industrial equipment supplied by the applicant.

- For HSN Code 84151090, the tax rate was determined to be CGST 14% + SGST 14%.
- For HSN Code 84798920, the tax rate was set at CGST 6% + SGST 6%.
- For HSN Code 84145930, the tax rate was established as CGST 9% + SGST 9%.

Conclusion:
The Authority ruled that the applicable GST tax rates for the rental/leasing services provided by M/s. Ventair Engineers for industrial equipment under the specified HSN codes would be as detailed above, based on the provisions and analysis conducted.

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