AAR and AAAR Weekly Round Up

Customs AAR Declines Samsung’s 5% Preferential Duty Claim on Split AC Imported without PCBA & Refrigerant due to Appeal Pendency

In Re: M/s Samsung India Electronics Private Limited CITATION : 2025 TAXSCAN (AAR) 192

The Customs Authority for Advance Rulings (CAAR), Mumbai recently declined to issue an advance ruling on an application filed by Samsung India Electronics Private Limited, regarding preferential customs duty on split air-conditioner units imported without Printed Circuit Board Assembly (PCBA) and Refrigerant, noting that a similar case was awaiting finality before the Customs, Excise And Service Tax Appellate Tribunal (CESTAT).

Samsung contended that these components, though arriving in separate consignments, would together constitute complete split air conditioner units after local assembly in India, and thus queried whether such imports would qualify for preferential duty at 5% under Notification No.152/2009-Customs dated 31.12.2009, subject to the applicable Rules of Origin under Notification No.187/2009-Customs (NT).

After examining the submissions, Prabhat K. Rameshwaram, Member, concurred with the Department, noting that the question raised by Samsung India was identical to the one pending before the Appellate Tribunal. Referring to the statutory bar under Section 28-I(2) of Customs Act, 1962, the Member observed that since the question raised in this application was similar/identical to a matter pending before the Appellate Tribunal, it would refrain from passing any ruling in the instant case.

Storage of Paddy is 'Agricultural Produce,' Rent Not Taxable under GST: AAR Confirms ‘Nil’ GST Rate

In Re: M/s LENA MODERN RICE MILL CITATION : 2025 TAXSCAN (AAR) 193

The Authority for Advance Ruling (AAR), Tamil Nadu, has ruled that the rent received for a godown used exclusively for the storage of paddy is exempt from Goods and Services Tax (GST). The ruling classified paddy as 'agricultural produce' under the relevant GST exemption notifications.

The AAR clearly distinguished between Paddy and Rice. Paddy is the raw, harvested grain still in its husk, a direct product of cultivation. While it may undergo minimal processing (like dehusking) before being sold, this process does not fundamentally change its nature but merely makes it marketable. The Authority concluded that paddy satisfies all the conditions to be classified as 'agricultural produce.' Based on the analysis, the Tamil Nadu AAR ruled that since paddy qualifies as 'agricultural produce,' the service of storage or warehousing of paddy attracts a Nil rate of GST under the exemption entry.

5% GST on Supply of Quick Lime and Hydrated Lime with Purity Less than 98% : AAR

M/s. Kaycce Industrial Chemicals Private Limited CITATION : 2025 TAXSCAN (AAR) 194

The Authority for Advance Ruling (AAR), Tamil Nadu, clarified that Quick Lime and Hydrated Lime containing impurities and having a purity below 98% were classifiable under HSN 2522 as industrial lime and attract a Goods and Services Tax (GST) of 5%.

The Authority of Advance Ruling consisted of Additional Commissioner/ Member (CGST), C. Thiyagarajan and Joint Commissioner/Member (SGST), B. Suseel Kumar, heard and reviewed the AAR. The Authority of Advance Ruling consisted of Additional Commissioner/ Member (CGST), C. Thiyagarajan and Joint Commissioner/Member (SGST), B. Suseel Kumar, heard and reviewed the AAR.

Thus, the supply of Quick Lime and Hydrated Lime, with a purity of less than 98%, by the applicant under Heading 2522 of the Customs Tariff Act, 1975 was taxable at the rate of 5% (comprising 2.5% Central Goods and Services Tax and 2.5% State Goods and Services Tax).

No GST on Balance Freight Amount Deposited by Shippers to Carriers’ Escrow Accounts: AAR

In Re: M/s. B2B Trucks Private Limited CITATION : 2025 TAXSCAN (AAR) 195

The Tamil Nadu Authority for Advance Ruling (AAR) recently held that no Goods and Services Tax(GST) may be applicable on balance freight amounts deposited by shippers into a current escrow account before it is subsequently transferred to that of the carriers without any deductions.

A Bench of C. Thiyagarajan (CGST Member) and B. Suseel Kumar (SGST Member) observed that the balance freight amount received by the applicant from shippers represents funds that is payable to the carriers and not consideration for any supply made by the applicant.

The Authority held that once it is determined that the freight amount deposited with the applicant does not constitute a ‘consideration’ to the applicant and once it is established that there is no supply of goods or services or both, then the applicant cannot be held liable to pay taxes under GST on the deposit amount which does not belong to them, and is meant to be forwarded to the accounts of carriers without any deduction.

Dealers must Raise GST Invoice on Non-Monetary Perquisites from Principal if TDS Deducted u/s 194R: AAR

In Re: M/s. KARTHIK AND CO CITATION : 2025 TAXSCAN (AAR) 196

The Tamil Nadu Authority for Advance Ruling (AAR) has held that non-monetary perquisites such as free gifts, compliments and tour packages received by a dealer from its principal manufacturer constitutes taxable supply of service where the manufacturer deducts tax at source (TDS) as per Section 194R of the Income Tax Act, 1961.

The AAR held that the transaction amounted to “supply of support services,” taxable at 18%, and the value must be determined based on Rule 27 of the CGST Rules where consideration is not wholly in money. The Authority further held that the tax invoice issued by the applicant was valid and may be issued inclusive of GST, since no additional monetary consideration was received apart from the value reflected in the TDS certificate.

Non-Monetary Benefits like Free Gifts, Tour Packages Received by Dealer from Principal Constitute Supply under GST: AAR

In Re: M/s. KARTHIK AND CO CITATION : 2025 TAXSCAN (AAR) 196

The Authority for Advance Ruling, Tamil Nadu recently affirmed that non-monetary benefits such as free gifts, compliments and foreign or domestic tour packages received by a dealer from its principal manufacturer constitutes supply of service under Section 7 of the Central Goods and Services Tax Act, 2017 (CGST Act) and are therefore liable to Goods and Services Tax (GST).

The Bench comprising C. Thiyagarajan (IRS), Member (CGST) and B. Suseel Kumar (MBA), Member (SGST) observed that once the manufacturer had deducted TDS (Tax Deducted at Source) under Section 194R of the Act, the benefit was recognised as having monetary value. Therefore, the applicant was correct in treating those perquisites as taxable and issuing corresponding tax invoices charging CGST and SGST.

Adama India’s “Flamberge” is a Plant Growth Promoter and not Fertilizer: Customs AAR places Product under CTH 3808

In Re: M/s. Prabhat K. Rameshwaram CITATION : 2025 TAXSCAN (AAR) 197

The Customs Authority for Advance Rulings (CAAR), Mumbai has ruled that Adama India Private Limited’s product “Flamberge” - described by the company as a bio-stimulant is not classifiable as a fertilizer under Chapter 31 of the Customs Tariff and instead merits classification under Customs Tariff Heading (CTH) 3808.

On analysis, the CAAR observed that Flamberge functions as a bio-stimulant by stimulating physiological processes in plants and enhancing nutrient uptake efficiency, rather than directly supplying nutrients in the manner of fertilizers. The Authority held that the product’s essential character aligns more closely with plant growth regulators and similar preparations covered under Heading 3808.

Accordingly, Prabhat K. Rameshwaram - the Customs Authority for Advance Rulings issued the ruling that Adama India’s “Flamberge” bio-stimulant is not classifiable as a fertilizer under Chapter 31 and is correctly classifiable under CTH 3808.

18% GST on Carbonated Drinks (Aerated Water) Supplied as Part of Restaurant Service: AAR cites ‘Composite Nature’

In Re: SUMMIT HOTELS & RESORTS PRIVATE LIMITED CITATION : 2025 TAXSCAN (AAR) 198

The West Bengal Authority for Advance Ruling (AAR) has held that the supply of carbonated drinks, including aerated water, when provided within the premises of the restaurant, as part of restaurant service constitutes a composite supply of service and attracts GST (Goods and Services Tax) at 18%.

The Authority observed that the primary intention of customers visiting the restaurant is to avail a complete dining experience, which includes food and beverages consumed within the restaurant premises. It noted that even when aerated beverages are ordered independently, they are prepared, served and consumed as part of restaurant service, making the supply inseparable from the service element.

Accordingly, the AAR bench comprising Shafeeq S. and Jaydip Kumar Chakrabarti held that the supply of carbonated drinks in such circumstances qualifies as a composite supply of service, with restaurant service being the principal supply. Since the applicant’s restaurant is located in a specified hotel premises, the applicable rate would be 9% Central GST + 9% State GST, resulting in a cumulative 18% GST.

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