Marine equipment and services for fishing vessels attract 5% GST under specific conditions per AAR Kerala ruling

AAR Kerala ruled on GST applicability for marine equipment and services. Marine engines (HSN 8408), spares (HSN 8409), and gearboxes (HSN 8483) attract 5% GST when supplied as parts of fishing vessels under Serial No. 252, despite classification remaining under Chapter 84. The concessional rate applies only when goods are used in vessels under headings 8901, 8902, 8904-8907; otherwise standard rates apply based on respective classifications. Maintenance and repair services for fishing vessels constitute composite supply with services as principal element, classified under heading 998714, attracting 5% GST per Notification No. 02/2021. Marine engine oil (HSN 27101972) does not qualify for 5% concessional rate under Serial No. 164 as amended by Notification No. 14/2019. The notification covers only propulsion fuels like furnace oil, diesel, bunker fuel (HSN 27101951), not lubricants. Marine engine oil continues to attract standard 18% GST as it serves maintenance purposes rather than direct propulsion.

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ISSUES:

Whether marine engines (HSN 84081093) and their spare parts (HSN 84099990) supplied for use as parts of fishing vessels (Customs Tariff Headings 8902, 8904, 8905, 8906, 8907) attract GST at concessional rate of 5% under Serial No. 252 of Schedule I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017.Whether marine gearboxes (HSN 84834000) supplied as parts of fishing vessels under the above headings attract GST at 5% under the same notification.Applicability of 5% GST on maintenance and repair services of marine engines, gearboxes, and other parts of fishing boats as per Notification No. 02/2021-Central Tax (Rate) dated 02.06.2021.Whether the concessional GST rate of 5% applicable to marine fuel under Serial No. 164 of Schedule I of Notification No. 01/2017-Central Tax (Rate), as amended by Notification No. 14/2019-Central Tax (Rate), extends to marine engine oil.

RULINGS / HOLDINGS:

Marine engines and their spare parts supplied for use as parts of fishing vessels falling under Customs Tariff Headings 8902, 8904, 8905, 8906, and 8907 shall attract GST at the rate of 5% (2.5% CGST + 2.5% SGST) as per Serial No. 252 of Schedule I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. If supplied for other uses, GST applies as per their own classification.Marine gearboxes supplied as parts of goods under the specified headings attract GST at 5% under Serial No. 252 of Schedule I of the said Notification; otherwise, GST is charged according to their respective Customs Tariff classification.Maintenance and repair services of marine engines, gear, and other parts of fishing boats attract GST at 5% from 02.06.2021, pursuant to Notification No. 02/2021-Central Tax (Rate) dated 02.06.2021, treating such services as composite supplies with the principal supply being repair or maintenance services classified under Heading 9987.The concessional GST rate of 5% applicable to marine fuel under Serial No. 164 of Schedule I of Notification No. 01/2017-Central Tax (Rate), as amended, does not extend to marine engine oil, which is classified under HSN Code 27101972 and attracts GST at the standard rate of 18%.

RATIONALE:

The legal framework is based primarily on Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 and its Serial No. 252 of Schedule I, which provides a concessional GST rate of 5% for parts of goods under headings 8901, 8902, 8904, 8905, 8906, and 8907, irrespective of their classification under other chapters, confirmed by CBIC Circular No. 52/26/2018-GST dated 09.08.2018.Classification of marine diesel engines and spares remains under Chapter 84 as per Note 2 to Section XVII of the First Schedule to the Customs Tariff Act, 1975, but concessional GST applies due to their use as parts of fishing vessels.Notification No. 02/2021-Central Tax (Rate) dated 02.06.2021 amended the GST rate on maintenance and repair services of fishing vessels and their components to 5%, harmonizing the tax treatment of services and goods supplied together as composite supplies, simplifying compliance and eliminating previous rate disparities.The distinction between marine fuel and marine engine oil is based on their function: marine fuel is used for propulsion and thus eligible for concessional rate under amended Notification No. 14/2019, whereas marine engine oil is a lubricating oil, a consumable not used for propulsion, and therefore attracts the standard GST rate.

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