Composite Goods used Primarily as Parts of Railway Locomotives to be classified under Heading 8607 Taxable at 5%: AAR [Read Order]

The West Bengal Authority of Advance Ruling in an application filed by Kay Pee Equipments Pvt Ltd held that composite goods manufactured by the Applicant that is used primarily as parts of railway locomotives are to be classified under heading 8607 and taxable @ 5% GST with no refund of the unutilized input tax credit.

The applicant seeks a ruling on the classification of railway locomotive spare parts manufactured by him for the applicable rate of tax on them.

The applicant submits that he has been classifying the manufactured goods under the Heading 8607 of the First Schedule to the Customs Tariff Act, 1975 to which the GST Act is aligned for classification in accordance with Circular no. 30/4/2018-GST and relevant Memo issued by the Railway Board.

The Department states that only the goods classifiable under Chapter 86 when supplied to the railways shall attract 5% GST with no refund. Other goods, even if supplied to the railways, will attract the applicable rate for such goods.

The Bench constituting of Ms Susmita Bhattacharya, the Joint Commissioner and Mr Parthasarathi Dey, the Senior Joint Commissioner held that “the composite goods manufactured by the Applicant that are used primarily as parts of railway locomotives are to be classified under heading 8607 and taxable @ 5% GST with no refund of the unutilized input tax credit. The same classification will apply to the Applicant’s other supplies to the railways if they are used primarily as parts of railway locomotives, provide they are not excluded by Note 2 of Section XVll. Supplies other than the above two categories, if any, shall not be classified under heading 8607.”

The Bench discussed that the interpretation Notes 2 and 3 of Section XVII, which constitutes of Chapters 86 to 89 prohibits classification of ‘parts’ or ‘accessories’…Therefore, components of railway locomotives should be classified under heading 8607 subject to the provisions of Notes 2 and 3 of Section XVll.” Further, “Heading 8607 inter alia refers to parts of railway locomotives (such as bogies, bissel-bogies, axels and wheels and parts thereof). A combined reading of the above notes, therefore, reveals that any parts of locomotives, unless specifically excluded by Note 2 of Section XVll should be classified under heading 8607, provided they are used solely or principally as parts of railway locomotives in terms with Note 3 of Section XVll.”