The Kerala Authority for Advance Ruling (AAR), Thiruvananthapuram has held that the Marine products supplied as parts of fishing or floating vessels attract 5% Goods and Services Tax (GST) and its replacement during the warranty period is exempted from GST if done without consideration.
The ruling was issued in response to an application submitted by S. Radhakrishnan, proprietor of M/S. Bright Metal Works, seeking clarification on the GST rate and classification of various marine parts used in fishing and floating vessels.
The applicant had sought an advance ruling on several key points.
Firstly, the applicant inquired about the tax rate applicable to marine propellers, stern tube sets, rudder sets, SS propeller shafts, MS shafts for couplings and intermediates and cutlass rubber bushes.
Secondly, the applicant wanted to know whether all parts of fishing and floating vessels fall under Serial Number 252 of the 1st Schedule or Serial Number 371 of the 3rd Schedule.
The applicant also questioned whether the replacement of parts during the warranty period constituted a supply under GST.
Additionally, it also sought clarification on their eligibility to avail 18% Input Tax Credit (ITC) on the purchase of raw materials since the manufactured products were taxable at 5% as per schedule 247/252.
Lastly, it also requested a specific Harmonized System of Nomenclature (HSN) code for cutlass rubber bushes.
The AAR held that marine propellers, stern tube sets, rudder sets, SS propeller shafts, MS shafts for couplings and intermediates, and cutlass rubber bushes, when supplied for use as parts of goods falling under Heading 8901, 8902, 8904, 8905, 8906, or 8907, attract GST at a rate of 5% as per entry at Sl. No. 252 of Schedule 1 of Notification No. 01/2017 Central Tax (Rate).
The authority also clarified that the goods supplied as parts of fishing or floating vessels falling under HSN 8902 are taxable at a rate of 5% as per entry at Sl. No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate).
Regarding the replacement of parts during the warranty period, the AAR clarified that such replacements made without consideration are not liable for GST.
However, if the additional consideration is received for warranty supplies, it would be subject to GST at the applicable rate, the AAR held.
The AAR made it clear that the applicant is eligible to avail ITC on tax paid for inputs, input services and capital goods, subject to the conditions and limitations prescribed under Sections 16, 17, and 18 of the CGST Act, 2017, and relevant rules.
The Authority consisting of Dr. S.L. Sreeparvathy, IRS, Additional Commissioner of Central Tax and Shri Abraham Renn S, IRS, Additional Commissioner of State Tax determined that cutlass rubber bushes are classifiable under Heading 4016 99 60 of the Customs Tariff Act, 1975.
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