EDF Thrusters with Battery Pack for Jet Suit classified under CTH 84145990 with 18% GST rate

AAR Karnataka ruled on classification and tax rate for EDF Thrusters with Battery Pack for Jet Suit supply. The applicant procures but does not manufacture EDF thrusters and battery packs, supplying them with performance mapping and test reports. AAR held that Electric Ducted Fans are propulsion systems used in RC planes and drones, functioning as fans enclosed in cylindrical housing powered by electric motors. The products were classified under CTH 84145990 as fans enclosed by metal sheet. AAR determined 18% GST rate applies under Entry 317B of Schedule III, Notification 1/2017-Central Tax covering goods under tariff 8414 for air pumps, compressors and fans.

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Issues Involved:
1. Classification of "EDF Thrusters with Battery Pack for Jet Suit".
2. Applicable HSN code for the supply.
3. Applicable rate of tax under the CGST Act, 2017 and KGST Act, 2017.

Summary:

Issue 1: Classification of "EDF Thrusters with Battery Pack for Jet Suit"
The applicant sought an advance ruling on the classification of "EDF Thrusters with Battery Pack for Jet Suit" supplied to DEBEL. The applicant contended that the Jet Suit qualifies as an aircraft under the Aircraft Act, 1934, and thus the EDF Thrusters with Battery Pack should be classified as parts of aircraft under HSN code 8802 or 8806. However, the authority noted that the Jet Suit derives support in the atmosphere by generating thrust against the earth's surface, which does not meet the definition of an aircraft u/s 2(1) of the Aircraft Act, 1934. Additionally, the applicant did not provide any DGCA license/registration/exemption for operating an aircraft. Therefore, the authority concluded that the EDF Thrusters with Battery Pack do not qualify as parts of aircraft.

Issue 2: Applicable HSN Code
The authority examined the classification of the EDF Thrusters and determined that they are a type of propulsion system commonly used in electric RC planes and small drones. The EDF Thrusters are essentially fans enclosed in a cylindrical housing, powered by electric motors. Based on the Customs Tariff Act, 1975, and the general rules for the interpretation of the harmonised system, the authority classified the EDF Thrusters under CTH 8414.5990 as "Fans Others."

Issue 3: Applicable Rate of Tax
The authority referred to Entry Number 317B of Schedule III to the Notification 1/2017-Central Tax (Rate) dated 28.06.2017, which specifies an 18% GST rate for goods falling under 8414, including fans. Consequently, the applicable rate of GST on the supply of "EDF Thrusters with Battery Pack for Jet Suit" is 18%.

Ruling:
a) The supply of "EDF Thrusters with Battery Pack for Jet Suit" made by the applicant to DEBEL merits classification as "Fan Others" category.
b) The applicable HSN code for "EDF Thrusters with Battery Pack for Jet Suit" is 8414.5990.
c) The applicable rate of GST on the supply is 18%.

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