The Maharashtra Authority of Advance Ruling (AAR) ruled that 5% GST on supply of MDEs and parts exclusively and directly to shipyards or Indian Navy for use in manufacture of ships, vessels, boats, floating structures.
The applicant, MAN Energy Solutions India Private Limited, is engaged in design and manufacture of two-stroke and four-stroke engines. Applicant’s range of products includes complete marine propulsion systems, turbo machinery units for the oil & gas as well as the process industries and turnkey power plants. Applicant is also engaged in manufacturing and supply of parts of engines, like piston, con rod, etc. Applicant assembles and manufactures diesel engines by using various imported or locally procured parts and also trades in imported diesel engines. The supply of engines and parts of engines is made by importing or locally procuring the parts. These parts are not assembled by the Applicant in India.
The applicant has sought the advance ruling on the issue whether the marine diesel engine, and parts supplied by the Applicant exclusively to ship building companies / shipyards or Indian Navy for use and application in ships, vessels, boats, floating structures etc. are to be classified under Sr. No. 252 of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017.
The two member bench of Rajiv Mangoo and T.R.Ramnani concluded that the supply of MDEs and parts thereof supplied by the Applicant exclusively and directly to ship building companies/shipyards or Indian Navy for use in manufacture of ships, vessels, boats, floating structures etc. will be classified under Sr. No. 252 of Notification No. 1/2017- C.T. (Rate), dated 28-6-2017. If the applicant supplies the impugned goods to parties other than ship building companies and for other purposes, it would not be covered in the said entry and is liable to be taxed at respective higher rates as per schedule entry.
“Marine diesel engine, and parts thereof will be covered under Sr. No. 252 of Notification No. 1/2017-C.T.(Rate), dated 28-6-2017, only when used in the manufacture of goods falling under 8901, 8902, 8904, 8905, 8906, 8907 and supplied only to ship building companies/shipyards or Indian Navy. Items which do not conform to “parts of marine diesel engines” will not be covered nder the said Sr. No. 252 of Notification No. 1/2017-C.T.(Rate), dated 28-6-2017.”
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