Supply of CKD e-rickshaw components: classification depends on included major components; vehicle attracts lower GST, incomplete sets attract higher GST.

Classification of a complete set of e-rickshaw components in CKD form hinges on the essential character test under tariff interpretation: if the set includes the motor and any three of the four major components (transmission, axles, chassis, controller) in proportional numbers, it is classified as the finished vehicle and attracts GST at 2.5% CGST + 2.5% SGST under HSN 87038040. If the supply lacks the motor or lacks any two of those four major components, it is classified as components/parts and taxed at 9% CGST + 9% SGST under separate entries.

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Issues: (i) Whether supply of a complete set of components of an electric three-wheeler vehicle (e-rickshaw) in Completely Knocked Down (CKD) form, necessary and sufficient for assembly of the finished vehicle, should be classified as the finished vehicle itself and what is the applicable rate of GST; (ii) Whether such supply should be classified as a set of parts and what is the applicable rate of GST.

Issue (i): Whether a CKD consignment of e-rickshaw that includes motor and any three of the four major components (transmissions, axles, chassis, controller) in proportionate numbers qualifies as supply of the finished vehicle and the GST rate applicable.

Analysis: The classification is governed by HSN classification under the Customs Tariff Act and the interpretative Rule 2(a) of the GIRs which permits incomplete or unassembled articles to be classified as complete articles where they possess the essential character of the finished article. The Office Order C.No. VIII/ICD/TKD/6AG/104/2013/pt Dated 12.03.2014 identifies five components that confer essential character to an e-rickshaw; judicial authorities have applied the essential character test to CKD consignments. The Authority applies the essential character test to the facts, requiring motor plus any three of the listed other components in proportionate numbers for assembly.

Conclusion: A CKD consignment that includes motor and any three of the four major components (transmissions, axles, chassis, controller) in proportionate numbers is to be classified as the finished e-rickshaw and is taxable at 2.5% CGST + 2.5% SGST under HSN 87038040.

Issue (ii): Whether a CKD consignment that does not include the motor or is missing any two of the other four major components should be classified as parts and the GST rate applicable.

Analysis: Applying the same essential character test under Rule 2(a) and the Office Order, absence of the motor or absence of any two of the other essential components means the consignment lacks the essential character of the finished vehicle. Such consignments are classifiable as parts/accessories under the relevant tariff entries and carry the rates applicable to those parts as enumerated.

Conclusion: Where the CKD supply lacks the motor or is missing any two of the other four major components in proportionate numbers, the supply is to be classified as components/parts of e-rickshaw and is taxable at 9% CGST + 9% SGST under the relevant entries.

Final Conclusion: The classification and GST rate for CKD consignments of e-rickshaws depends on whether the consignment satisfies the essential character test under Rule 2(a) GIRs read with the referenced Office Order; consignments meeting the specified component threshold are treated as finished vehicles at the lower rate while others are treated as parts at higher rates.

Ratio Decidendi: For HSN and GST classification, an unassembled CKD consignment must be treated as the finished vehicle where, as presented, it possesses the essential character of the finished article under Rule 2(a) GIRs; for e-rickshaws this requires motor plus any three of transmissions, axles, chassis and controller in proportionate numbers.

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