Different GST rates for the same product due to different tariff classification

[Nikhil Oltikar]

Madam/Sir,

A product was classified in different HSN codes under the same chapter heading by different manufacturers prior to implementation of GST. After July 1 2017, Certain HSN codes attracted 18% GST while other attracted 28% GST. Now certain manufacturers are supplying under 18% GST and others under 28% GST.

How can this issue be resolved?

[KASTURI SETHI]

There is no change in HSN of the products whether pre-GST era or post GST era. It is internationally based. However, there are different sub-heading nos. Of same Chapter. Rate depends upon the complete HSN Code . Chapter may be same but Heading No. Or sub-heading no. may vary. Sometimes rate of tax /duty depends upon last two digit. So read carefully HSN which stands for Chapter, Heading and Sub-heading no. So there cannot be different rates for same product. There must be some difference in the light of Heading or sub-heading no. Central Excise Tariff Act must be consulted before arriving at any decision in this aspect. Proper classification of the product is crucial as it implicates huge revenue. Wrong classification can result into short levy. Excess payment GST can also create problem with reference to ITC. Sometimes sub-heading nos. are changed at international level and Govt. of India follows the same. I have received phone calls when ER.1 return was rejected because of wrong sub-heading no. A manufacturer must be well equipped with latest changes in HSN every year at least at the time of presentation of Budget. This is for your information pl.

[Nikhil Oltikar]

Dear Mr. Sethi,

Thank you very much for your reply. The details of the dilemma are as follows:-

Company A & Company B manufacture the same Product X.

Company A classified the Product X under Tariff Code 11113344 at the time of it's excise registration.

Company B classified the Product X under Tariff Code 11115566 at the time of its excise registration.

Prior to 1st July 2017, there was no issue as excise rates for both HSN codes were the same.

After 1st July 2017 , HSN Code 11113344 attracted 18% GST and HSN Code 11115566 attracted 28%.

Neither Company A nor Company B can change their product tariff classification.

How can this issue be resolved?

[KASTURI SETHI]

Pl. let me know the exact name of the product and its usage. Both Chapter/Heading/Sub-Heading Nos. appear to be wrong.

[KASTURI SETHI]

I have Central Excise Tariff Act as on 1.3.17 and both sub-heading nos. are not available. When these HSNs have been added have to be ascertained after reading all the amendments / additions after 1.3.17 onwards. Can you post both invoices in this forum ? Without seeing invoices we cannot arrive at any concrete decision. Sometimes classifications are decided on the basis of judgement of Supreme Court and this is in addition to the routine changes take place every year.

[Nikhil Oltikar]

Dear Sir,

I simply quoted those HSN codes as examples. They are meant to be hypothetical.

[KASTURI SETHI]

Dear Nikhil ji,. There is no room for hypothetical thinking in the eyes of law. Law is based facts and not on imagination.

[DR.MARIAPPAN GOVINDARAJAN]

What Sri Sethi says is correct

[KASTURI SETHI]

Sir, Thank you for your support.

[Ganeshan Kalyani]

Sri Nikhil Ji if you want answer then provide correct HSN otherwise your query will not be resolved.

[Ganeshan Kalyani]

Sri Kasturi Sir, i agree with you that some HSN are intentionally chosen to save on the tax part. Department searches for such assesses. But in the process innocent assesses are getting troubled. Thanks.

[Guest]

Hello Sir,

We import Computer components and this problem of different GST rates is prevalent for the Computer power supplies. The classification is clearly 8504.4029 or 8504.4090. Mumbai Customs is levying 18% GST, whereas Chennai Customs classifies them at 28%. Delhi Air customs levies 18% whereas the ICD at Delhi levies 28%. Due to this reason, we at Chennai are not able to sell the goods to our co-dealers based in Delhi as they have classified the same at 18%. We have written to the GST council to sort out this anomaly, but there is no action for the last 4 months. We are eagerly waiting for them to solve the problem at least by the Nov. 10 meeting. Further the same product, viz., computer power supplies can be classified under the heading 8473.30 where it explicitly attracts only 18%. Prior to GST, the rates were same for both headings and it did not matter where the goods were classified.

Venkatesan

[KASTURI SETHI]

Dear Sir, Your will be solved in the meeting to be held on 10.11.17. GST Council takes up such issue on priority. Previously the Council has taken up the issue and solved. Nothing to worry. I am hopeful.

[Nash Industries I Pvt Ltd]

Please refer to FAQ released in Sep. It pertains to parts of sewing machines. it has been clarified that though both machine and parts are classified under the same HSN upto 4 digit, the rate of GST is different.

In the instant case, though the HSN 8504 has two rates 18% and 28%, the rate of GST is 18% as per serial number 453 of Schedule III which is correct.

You may please refer to FAQ serial number 23 released in TOI in late Sep 2017 / Early Oct (prior to 6th Oct).

My tweets to GOI /GST council on this matter wrt 8504 remained unanswered till date. However, the FAQ released provided the much needed clarification.

Regards

S.Ramaswamy

AI Summary

Tariff classification determines GST rate; uniform classification required to resolve rate discrepancies across suppliers; prompt GST Council guidance. Applicable GST rate is determined by the complete HSN (chapter, heading and sub heading); apparent rate differences for the same product reflect differences in sub heading classification, which must be resolved by examining precise product description and use, the Central Excise Tariff Act and its amendments, relevant judicial pronouncements, and administrative clarifications such as GST Council FAQs.