TaxTMI 
TaxTMI 
2019 (10) TMI 274
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....ium Bayan, 129 to 140 Greams Road, Nungambakkam, Chennai-600006 (hereinafter called the Applicant) is a subsidiary of HP Inc headquartered in California, USA and is engaged in the import and sale of IT products primarily personal computers (i.e., desktops and laptops) and printers. They are registered under GST with GSTIN 33AAACC9862F1ZP. The applicant has sought Advance Ruling on: What is the rate of GST applicable on supply of desktops consisting of CPU, monitor, Keyboard and mouse or any combination of input/output unit? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they are registered as a private limited company under the Companies Act, 1956. They are engaged in the import and sale of IT products primarily personal computers (i.e., desktops and laptops) and printers. Desktops are nothing but personal computers designed for regular use and generally houses a CPU along with other input and output units like monitor, keyboard, mouse etc. Des....
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.... in the form of systems consisting of variable number of separate units. Thus it is seen that ADPs classifiable under the Chapter may be in the form of systems consisting of variable number of units. • Section 19 of the Customs Act, 1962 which provides for "Determination of duty where goods consist of articles liable to different rates of duty" states that accessories of, spare parts or maintenance and repairing implements for any article which satisfy the conditions specified in the rules made in this behalf shall be chargeable at the same rate of duty as that of the article. In view of the above they have stated that the desktops (with or without input(s) and output unit(s)) are classified/ covered under HSN 8471, which is recognized as a single product. Further description of the product under the GST notification is verbatim of the CTH 8471 and hence, all the products covered therein shall be eligible for the rate of 18%. 2.3 The Applicant has also stated that by applying Rule 3b of the General Rules of Interpretation of Import Tariff to the present case, a CPU sold along with a monitor, keyboard, mouse etc would be classifiable under the same heading, i.e. H....
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.... a) Common parlance or commercial understanding of the product: A "desktop" according to general consumer understanding includes a central processing unit (encasing the motherboard and processor), a monitor, a keyboard and a mouse. (Source: Wildpedia). Hence, by applying the common parlance test, the supply of CPU, monitor, keyboard and mouse together would qualify as supply of "desktop". b) Manner of usage of the product: The input units like keyboard and mouse convert physical actions to input signals that the CPU can process; output units like the monitor and printer help convert electronic signals into human understandable form. Both the system units and the peripheral units play a pivotal role in each other's functionality and are required to work together for the computer system to function. Hence, without any of these units, a desktop cannot function effectively. Thus, even though the CPU, monitor, keyboard and mouse are independent units visually or to the naked eye, they are interconnected and integrated together for effective functioning of desktop. c) Manner of issuance of purchase orders and shipment to customer: The purchase order issued by ....
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.... the usage of the system is not possible at all. It is not without a doubt that the input and output units of a computer system aid the main part of the system i.e. the CPU to be able to undertake the operations it is meant to do. These units are for this reason alone referred to as "peripheral units". A "peripheral" is an "ancillary" device. Thus the input and output units that used to feed information into and get information from the CPU cannot qualify as the principal supply. Even from a value perspective, the CPU constitutes approximately 85% of the value of a computer. No customer would want to buy a monitor or a keyboard or a mouse and in the course of which would also buy a CPU. They had further relied on the FAQ issued by Central Board of Excise & Customs addressing the scenario where the laptop is supplied along with the laptop bag, wherein it is clarified that the rate of tax applicable will be that of the laptop. Thus even if the supply of desktop does not qualify as a "single supply", it would still qualify as a "composite supply" with the sale of CPU being the principal supply and accordingly be liable to tax at 18% as applicable for HSN 8471. They also submitted vari....
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.... 4.1 We have carefully examined the various submissions made by the applicant. From the submissions of the applicant it is seen that the applicant is subsidiary of HP Inc headquartered in California USA and is engaged in import and sale of IT products primarily Personal Computers (i.e. Desktops and Laptops) and printers. It is seen from the sample purchase order submitted that the product is being called "Desktop with Monitor" considered as a unit with the specifications for Monitor, internal configuration of CPU, keyboard, mouse. The invoice is raised for "Desktop Computer", though each of the parts are listed with serial number as per the specification. . It is further seen that the applicant has classified under CTH 84715000.The pricelist describe the product as "HP Desktop Pro a MT (Business Tower Desktop). A separate part number is assigned to the CPU and a separate one for Monitor. There is a single recommended selling price. From the advertisement material and the price lists submitted in respect of desktops, it is seen that the model specifications include Processor description, RAM & HDD, Graphics, OS, Monitor type, etc. 4.2 In the above factual position, the issue rai....
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....rage units, input units, output units 8471 60 - Input or output units, whether or not containing storage units in the same housing 8471 60 10 --- Combined input or out put units --- Printer : 8471 60 24 ---- Graphic printer 8471 60 25 ---- Plotter CTH 8528: 8528 MONITORS AND PROJECTORS, NOT INCORPORATING TELEVISION RECEPTION APPARATUS, RECEPTION APPARATUS FOR TELEVISION, WHETHER OR NOT INCORPORATING RADIO-BROADCASTRECEIVERS OR SOUND OR VIDEO RECORDING OR REPRODUCING APPARATUS - Cathode-ray tube monitors: 8528 42 00 -- Capable of directly connecting to and designed for use with an automatic data processing machine of heading 8471 8528 49 00 -- Other - Other monitors: 8528 52 00 -- Capable of directly connecting to and designed for use with an automatic data processing machine of heading 8471 8528 59 00 -- Other - Projectors: 8528 62 00 -- Capable of directly connecting to and designed for use with an automatic data processing machine of heading 8471 8528 69 00 -- Other Chapter Note 5A to Chapter 84 reads as follows (relevant to the case at hand): 5.(A)....
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.... respective functions or, failing that, in residual headings Section Notes 4 & 5 of Section XVI covering chapter 84 reads as follows: Note 4. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined Junction covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. Note 5. For the purposes of these Notes, the expression "machine" means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85. 4.4 From the above, it is evident that CTH 8471 covers 'Automatic Data Processing Machines' consisting of atleast a CPU, Keyboard and Visual Display, in the same housing or otherwise. Desktops supplied by the applicant have Central Processing Unit, motherboard memory all of which together storing the processing programme data necessary for the execution of the programme, is can be freely programmed in accordance with the requirements of the user....