The Karnataka Authority of Advance Ruling (AAR) ruled that 5% GST marine engine and its spare parts be supplied for fishing vessels for use as part of the fishing vessel.
The Applicant, M/s. South Indian Federation of Fishermen Societies is a Charitable Society formed under the Travancore-Cochin Literary Scientific and Charitable Societies Registration Act, 1955. This Society has been engaged in undertaking various welfare activities for the poor fisherman in South India for the last forty years. They provide the fishermen necessary fishing requisites at a concessional rate. Fishing boats and Ice Boxes are manufactured by the Applicant while Marine engines for fishing vessels are imported from outside India
The applicant has sought advance ruling in respect of rate of tax on Marine Engines coming under HSN Code 8407 and its spare parts exclusively used as part of fishing vessel of heading 8902. Whether GST leviable on supply of materials and labour charges incurred during the warranty period, free of cost. Rate of tax applicable for collection made towards supply of materials and labour charges towards repair of fishing vessels of heading 8902. Rate of tax on puff insulated ice boxes used by fishermen in fishing vessels for reducing spoilage and maintaining good hygiene. Rate of tax on marine engine coming under HSN Code 8407 supplied to Defence Department for patrol, flood relief and rescue operations
The coram of Dr. Ravi Prasad and T.Kiran Reddy held that the marine engine and its spare parts supplied for fishing vessel for use as part of the fishing vessel- CTH 8902) shall attract GST at the rate of 5% [2.5% – CGST + 2.5% – KGST) as per entry at Sl.No.252 of Schedule 1 of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017. If it is supplied for use other than as parts of fishing vessels, GST shall be applicable at the rate of tax on such goods under the respective Customs Tariff Heading classified. The provision of material and labour during warranty period without consideration(free of cost) does not come under the purview of supply in terms of Section 7 of the CGST Act, 2017 and no GST is leviable in such free of cost replacements/labour services.
“The activity of repair of fishing vessels is a composite supply involving supply of material/ spares which is ancillary to the predominant supply of services. The supply is appropriately classifiable under Heading 9987-998714- Maintenance and repair of transport machinery and equipment and vide Sl.No.25(ii) of the Notification No.11/2017 Central Tax (Rate) dated 28.06.2017 the supply is liable to GST at the rate of 18% (9% -CGST+9 % -KGST). The puff insulated ice boxes are appropriately classifiable under Customs Tariff Heading 3923 10 30- Articles for the conveyance or packing of goods, made of plastics – Boxes, cases, crates and similar articles – Insulated ware. The said articles falling under Customs Tariff Head 3923 are liable to GST at the rate of 18% [9% – CGST +9%-KGST] as per entry at Sl.No.108 of Schedule III of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017. Marine engines supplied for use as part of vessel falling under Customs Tariff Heading 8906, which are used by the Department of Defence and other agencies for patrol, relief and rescue operations, then the marine engine as part of such vessel will only attract GST at the rate of 5% 12.5% -CGST +2.5% – KGST as per the said entry,” the AAR said.
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