2025 (1) TMI 615 - AAR - GST

Slack adjusters for buses/trucks taxed at 28% GST, trailer slack adjusters at 18% GST based on vehicle application

The AAR Tamil Nadu ruled on GST classification of slack adjusters used in braking systems. Slack adjusters for buses and trucks are classified under HSN ... Classification of slack adjusters used in the braking systems of trucks, buses, and trailers - rate of GST - to be classified under HSN 87089900 as Parts and accessories of Motor Vehicles or not - HELD THAT:- In the instant case, Slack adjuster is an essential part of a Air-braking system in Buses, Trucks or Trailers and shall not be treated as 'parts of general use'. Accordingly, it has to be classified as 'Parts and accessories of Motor Vehicles' under HSN 8708 and can be sub-classified under 87089900 as 'Others' chargeable @ 28%. The applicant have informed that at present they are classifying the slack adjusters as per the Purchase order from the respective groups of OEM customers and raised concern that they have received information that the trade and other manufacturers of slack adjusters are classifying the product used in Truck and bus application under HSN 87169010 and charging 18% GST in their respective aftermarket sales. The slack adjusters used in the braking system of Buses and Trucks supplied to both OEMs and aftermarket Sales are classifiable as 'Parts and accessories of motor vehicles of heading 8701 to 8705, ---Others' under HSN 87089900 and attracts GST at the rate of 28%. The slack adjusters used in the braking system of a Trailer supplied to OEMs and aftermarket Sales are classifiable as 'Parts and accessories of trailers' under 87169010 and attracts GST at the rate of 18%. Irrespective of nature of customers namely, OEMs or aftersales, and the HSN classification in the purchase orders received, the applicant should ensure to adopt correct classification of the product as the slack adjusters supplied are different for both 'buses & trucks' application and 'trailer' application. Conclusion - The slack adjusters used in the braking system of 'Buses and Trucks' are classifiable as 'Parts and accessories of motor vehicles of heading 8701 to 8705---Others' under HSN 87089900 and attracts GST at the rate of 28%. The slack adjusters used in the braking system of Trailers' are classifiable as 'Parts and accessories of trailers' under 87169010 and attracts GST at the rate of 18%. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the classification of 'slack adjusters' used in the braking systems of trucks, buses, and trailers under different Harmonized System of Nomenclature (HSN) codes is correct.What is the appropriate Goods and Services Tax (GST) rate applicable to slack adjusters used in truck and bus applications versus those used in trailer applicationsRs.Whether the applicant should continue using the current classification and GST rates as per the purchase orders from OEM customers or align with industry practices.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Classification of Slack AdjustersRelevant Legal Framework and Precedents: The classification of goods under the GST regime is guided by the Central Board of Indirect Taxes and Customs (CBIC) tariff classification, interpretative rules, section notes, and chapter notes of the Harmonized System of Nomenclature (HSN).Court's Interpretation and Reasoning: The court emphasized the importance of classifying goods based on their specific use and technical specifications. It relied on the HSN and related notes to determine the appropriate classification for slack adjusters.Key Evidence and Findings: The applicant provided technical details differentiating slack adjusters used in trucks and buses from those used in trailers. The court noted these differences, particularly the number of holes and the presence of return springs.Application of Law to Facts: The court applied the HSN classification rules and determined that slack adjusters used in trucks and buses fall under HSN 87089900, while those used in trailers fall under HSN 87169010.Treatment of Competing Arguments: The court acknowledged the applicant's concern about industry practices but emphasized the need for correct classification based on technical specifications and end-use.Conclusions: The court concluded that the classification of slack adjusters should be based on their specific application and technical characteristics, aligning with the HSN classification.Issue 2: Applicable GST RatesRelevant Legal Framework and Precedents: The GST rates are determined by the classification of goods under specific HSN codes, as outlined by the GST Council.Court's Interpretation and Reasoning: The court reasoned that the GST rate should correspond to the correct HSN classification, with 28% for truck and bus applications and 18% for trailer applications.Key Evidence and Findings: The court considered the applicant's current practice of charging different GST rates based on purchase orders and technical specifications.Application of Law to Facts: The court applied the GST rates as per the correct HSN classification, ensuring consistency with the legal framework.Treatment of Competing Arguments: The court addressed the applicant's concerns about industry practices but maintained the need for adherence to the correct legal classification.Conclusions: The court concluded that the slack adjusters for trucks and buses should attract a GST rate of 28%, while those for trailers should attract 18%.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: 'Slack adjusters used in the braking system of 'Buses and Trucks' are classifiable as 'Parts and accessories of motor vehicles of heading 8701 to 8705 -Others' under HSN 87089900 and attracts GST at the rate of 28%.'Core Principles Established: The classification and GST rates for goods must align with their specific technical specifications and intended use as per the HSN guidelines.Final Determinations on Each Issue: The court ruled that the slack adjusters used in buses and trucks should be classified under HSN 87089900 with a GST rate of 28%, while those used in trailers should be classified under HSN 87169010 with a GST rate of 18%.