Bike scooter seat covers classified as accessories under CTH 87141090 not seat parts under CTH 94019900

The AAAR, Tamil Nadu ruled on classification of bike and scooter seat covers manufactured by cutting U Foam and stitching with Rexine sheets. The appellant argued seat covers should be classified under CTH 94019900 as parts of seats, not accessories under CTH 87141090. The AAAR held that seat covers are accessories, not integral parts essential for seat functioning, as they are sold separately by dealers on optional basis rather than by original manufacturers. The authority modified the lower AAR ruling, classifying seat covers under CTH 87141090 at 14% CGST + 14% SGST, rejecting the appellant's claim for classification as seat parts.

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Issues Involved:
1. Condonation of Delay
2. Classification and Applicable Rate of Tax on Two-Wheeler Seat Covers

Summary:

Condonation of Delay:

The appeal was filed by M/s Lions Seat Cushions Private Limited after a delay of 21 days beyond the normal time limit of 30 days. The delay was condoned as the appellant presented sufficient cause, including medical reasons, preventing timely filing. The delay was condoned in terms of the proviso to Section 100(2) of the CGST Act, 2017, allowing the appeal to be considered on merits.

Classification and Applicable Rate of Tax on Two-Wheeler Seat Covers:

The appellant sought an advance ruling on whether the GST rate of 28% collected and paid for bike and scooter seat covers under CTH 87089900 was correct. The Authority for Advance Ruling (AAR) classified the seat covers under CTH 87149990, taxable at 14% CGST + 14% SGST.

The appellant argued that the seat covers should be classified under CTH 94019900, claiming they are parts of seats and not accessories. They contended that the seat covers are meant for protection, not comfort, and should be taxed at 18%. The appellant referenced various tariff items under Chapter 9401 to support their claim.

The Appellate Authority analyzed the definitions of 'parts' and 'accessories,' concluding that seat covers are not integral parts of the seats but are accessories. The Authority noted that seat covers are generally not supplied by the original equipment manufacturers (OEMs) and are sold separately, often by dealers or in the local market. The Authority held that seat covers enhance the functional value of seats and are not essential parts.

The Authority further referenced pre-GST regime classifications and CBEC Circular No. 541/37/2000-Central Excise, which classified car seat covers as accessories under Chapter 8708. The Authority found that the same rationale applies to two-wheeler seat covers.

Based on these findings, the Authority ruled that two-wheeler seat covers are classified under CTH 87141090 and are taxable at 14% CGST + 14% SGST (28% IGST). The ruling of the lower authority (AAR) was modified to classify the seat covers under CTH 87141090, maintaining the same tax rate.

Order:

The Advance Ruling No. 105/AAR/2023 dated 05.09.2023 was modified to classify 'motorcycle and scooter seat covers' under CTH 87141090, with the applicable tax rate being 14% CGST + 14% SGST or 28% IGST.

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