Marine engines and spare parts for fishing vessels attract 5% GST under HSN 8407 21 00

AAR Kerala ruled on GST classification for marine engines and spare parts. Outboard motor engines (HSN 8407 21 00) and spare parts used in fishing vessels (CTH 8902) attract 5% GST. Marine engines for Defence patrol/rescue operations under CTH 8906 also attract 5% GST. Solar/battery-operated boat motors for fishing or tourism purposes attract 5% GST when used as vessel parts. Warranty repairs without additional consideration are not liable to GST. Repair services with separately invoiced spare parts and labor attract respective rates - spare parts at 5% and labor services at 18% (reduced to 5% from June 2021).

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Issues Involved:

1. Rate of tax on Outboard Motor Engines and its spare parts used in fishing vessels.
2. GST applicability on supply of materials and labor charges during the warranty period.
3. Rate of tax for repairs of fishing vessels.
4. Rate of tax on marine engines supplied to the Defense Department.
5. Rate of tax for solar or battery-operated electric boat motors and spare parts used for fishing.
6. Rate of tax for solar or battery-operated electric boat motors and spare parts used for tourism.

Summary:

Issue 1: Rate of tax on Outboard Motor Engines and its spare parts used in fishing vessels.

The authority ruled that outboard motor engines and spare parts supplied for use in fishing vessels falling under Customs Tariff Heading 8902 attract GST at the rate of 5% [2.5%-CGST + 2.5%-SGST] as per entry at SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017.

Issue 2: GST applicability on supply of materials and labor charges during the warranty period.

The supply of goods or services during the warranty period without consideration is not liable to GST. However, if any additional consideration is received, it will be liable to GST at the applicable rate for the goods/services as per the rate schedule.

Issue 3: Rate of tax for repairs of fishing vessels.

Maintenance and repair services of fishing vessels falling under Heading 8902 are classifiable under SAC 998714 and liable to GST at the rate of 5% [2.5%-CGST + 2.5%-SGST] with effect from 02.06.2021. If the value of spare parts and services are separately charged in the invoice, they shall attract GST at the rates applicable to such spare parts and services as per the GST rate schedule.

Issue 4: Rate of tax on marine engines supplied to the Defense Department.

Marine engines supplied for use as part of vessels falling under Customs Tariff Heading 8906, used by the Department of Defence for patrol, relief, and rescue operations, attract GST at the rate of 5% [2.5%-CGST + 2.5%-SGST] as per entry at SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017.

Issue 5: Rate of tax for solar or battery-operated electric boat motors and spare parts used for fishing.

Solar or battery-operated electric boat motors and spare parts supplied for use as part of fishing vessels falling under Customs Tariff Heading 8902 attract GST at the rate of 5% [2.5%-CGST + 2.5%-SGST] as per entry at SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017.

Issue 6: Rate of tax for solar or battery-operated electric boat motors and spare parts used for tourism.

Solar or battery-operated electric boat motors and spare parts supplied for use as part of boats/vessels falling under Customs Tariff Heading 8901, used for tourism purposes, attract GST at the rate of 5% as per entry at SI No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017.

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