Original car seat covers by OEMs classified under HSN 8708 not HSN 9401, attracting 28% GST rate

AAR, Andhra Pradesh ruled that original car seat covers manufactured and designed to permanently fit over raw foam seats of vehicles by OEMs and seat manufacturers, sold as essential and integral parts of seats with vehicles, are classifiable under HSN 8708 rather than HSN 9401. The Authority determined these permanent seat covers serve specialized functions aligned with specific vehicle design specifications and transcend mere functional contributions, assuming pivotal roles in ensuring structural integrity and performance. The classification under HSN 8708 attracts GST at 28% (CGST 14% + SGST 14%).

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Issues Involved:
1. Classification of original car seat covers.
2. Applicability of GST rate.

Summary:

Issue 1: Classification of Original Car Seat Covers
The applicant, M/s Saddles International Automotive & Aviation Interiors Private Limited, engaged in manufacturing and supplying original car seat covers, sought an advance ruling on whether these covers, permanently attached to the raw foam seat of vehicles, are classifiable under HSN 9401 as "Seats (other than those of heading 9402) whether or not convertible into beds, and parts thereof other than seats of a kind used for aircraft" and liable to GST @ 18%.

The applicant argued that the original car seat covers are an integral and essential part of the car seat, permanently fitted by OEMs, and not sold as additional covers or aftermarket products. They cited various judicial precedents and international rulings to support their claim that these covers should be classified under HSN 9401.

However, the Authority for Advance Ruling noted that the issue had been previously addressed in an earlier ruling concerning the same applicant, where it was determined that seat covers should be classified under HSN 8708 as parts and accessories of motor vehicles. The Authority reiterated that the "seats" supplied along with the original car should be classified under HSN code 8705.

Issue 2: Applicability of GST Rate
The applicant contended that the original car seat covers should be taxed at 18% GST under HSN 9401. They referenced Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017.

The Authority, however, concluded that the original car seat covers, being an integral part of the car seat assembly, should be classified under HSN 8708 and subjected to a GST rate of 28% (CGST @ 14% + SGST @ 14%).

Ruling:
Question: Whether the original car seat covers, designed to permanently fit over the raw foam seat of vehicles by OEMs and sold with the vehicle as an essential and integral part of the seat, are classifiable under HSN 9401 and liable to GST @ 18%Rs.

Answer: No, the original car seat covers are classifiable under HSN 8708 and are liable to GST @ 28% (CGST @ 14% + SGST @ 14%).

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