2024 (9) TMI 1283 - AAR - GST

Imported goods supplied on ships retain original customs classification for GST purposes under Section 2(52)

In Re: M/s. Imtiyaz Kaiyum Barvatiya

The AAR Gujarat ruled that imported goods supplied on ships retain their original customs classification for GST purposes. The applicant sought ... Change in classification of imported goods supplied on ships - Applicability of GST rate under notification No. 1/2017-Central Tax (Rate) - HELD THAT:- The applicant states that the goods/spares which consequent to its imports are supplied on ships are mostly essential part of ship to make it sea worthy. As far as this claim goes, the HSN explanatory notes of chapter 89 under which the applicant wants his goods to be classified after the imports are made under various tariff items, which states that contrary to the provisions relating to the transport equipment falling in other Chapters of Section XVII, this Chapter excludes all separately presented parts (other than hulls) and accessories of vessels or floating structures even if they are clearly identifiable as such. Such parts and accessories are classified in the appropriate headings elsewhere in the nomenclature. The Hon’ble CESTAT in its order dated 10.3.2005 [2005 (3) TMI 627 - CESTAT, CHENNAI], had framed the question to be decided as to whether the subject equipment’s which were declared as ‘ship spares’ for repairs of ocean going vessels are covered by the description of goods under SI. No. 227 of table annexed to notification No 23/1998-Cus. As is evident, the facts of the case & the question raised being different, the reliance placed by the applicant is not tenable, as far as the present dispute is concerned. Thus, as far as classification of the goods when supplied by the applicant as is mentioned in Annexure l-A is concerned, it would not change i.e. the classification would remain same as mentioned in the bill of entry filed before Customs. The goods when supplied by the applicant, post importation would be classified under the same chapter, heading, sub heading and tariff item under which it was classified by Customs and on which IGST was discharged during the course of import of the said goods. Issues Involved:1. Classification of imported goods supplied on ships.2. Applicability of GST rate under notification No. 1/2017-Central Tax (Rate).Detailed Analysis:1. Classification of Imported Goods Supplied on Ships:The applicant, engaged in the sale and distribution of marine distress signals and other ship-related equipment, imports various goods and supplies them on ships. The applicant contends that these goods are essential parts of ships, making them seaworthy. The goods are imported on payment of IGST and classified under specific tariff headings, with GST charged accordingly during supply. The applicant argues that these goods should be classified as parts of ships under headings 8901, 8902, 8904, 8905, 8906, and 8907, making them eligible for a reduced GST rate of 5%.The Authority for Advance Ruling (AAR) examined the applicant's contention and the relevant legal provisions, including the Customs Tariff Act, 1975, and notification No. 1/2017-Central Tax (Rate). The AAR noted that the applicant agreed to the classification done by Customs during importation and discharged the relevant duties, implying acceptance of the classification.The AAR emphasized that the classification of goods should not change post-importation during further supply. The classification remains the same as that done by Customs at the time of import. The AAR referenced several judgments to support this view, including M/s. Ashwani Homeo Pharmacy and Pooja Hardware Pvt. Ltd., which highlight that classification cannot change merely due to a different tax structure or at the consignee's end.The AAR also referred to the HSN explanatory notes for Chapter 89, which exclude separately presented parts and accessories of vessels from being classified under this chapter, even if they are identifiable as such. These parts and accessories should be classified under appropriate headings elsewhere in the nomenclature.2. Applicability of GST Rate Under Notification No. 1/2017-Central Tax (Rate):The applicant sought clarification on whether the goods listed in Annexure I-A should be classified under entry 252 of Schedule I of GST Notification No. 1/2017-Central Tax (Rate), making them liable to a GST rate of 5%. The applicant argued that these goods are essential parts of ships, making them eligible for the reduced GST rate.The AAR, however, concluded that the classification of the goods should remain the same as that done by Customs during importation. Consequently, the goods would not fall under entry 252 of Schedule I of the notification and would not be eligible for the reduced GST rate of 5%. The applicable GST rate would be based on the tariff entry under which the goods were classified during importation.Ruling:The AAR ruled that the supply of goods listed in Annexure I-A of the application should be classified under the same chapter, heading, sub-heading, and tariff item under which the goods were imported. The rate of GST applicable to the supply of these goods would be based on the tariff entry under which they were classified during importation.