5% GST payable on Marine Engines and its Spare Parts being part of Fishing Vessel: AAR [Read Order]

The Kerala Authority of Advance Ruling (AAR) ruled that 5% GST is payable on marine engines and its spare parts being part of fishing vessels.

The applicant, M/s. South Indian Federation of Fishermen Societies (SIFFS) is a non-Governmental Organization supporting the livelihood activities of small scale fishing communities in South India. The applicant is engaged in the business of supply of fishing boats (HSN 8902), ice boxes for fish preservation (HSN 3923) and marine engines (HSN 8407) to traditional small-scale fishermen communities at competitive prices. Fishing boats and iceboxes are manufactured by them while marine engines for fishing vessels are imported from outside India.

The applicant has sought the advanced ruling on the issues regarding the applicability of GST rate of 5% on marine engines of heading 8407 and its spare parts without considering its general tax rate as per the entry of Schedule I, Sl.No.252 of GST Act dated 28-06-2017, being the part of a fishing vessel of heading 8902.

Yet another issue raised was whether GST is applicable for supply of materials and labour charges incurred during the warranty period at free of cost on fishing vessels presented for repair works; Applicability of GST rate of 5% on supply of materials and service charges in connection with the repairs and maintenance of fishing vessels of heading 8902 without considering its individual general tax rates as per the entry of Sch. No.1, Sl.No.252 of GST Act dtd.28-06-2017, being the part of a fishing vessel of heading 8902.

The applicant has also raised the issue regarding the tax rate of puff insulated iceboxes produced by SIFFS and used by traditional fishermen at their fishing vessels for the purpose of reducing fish spoilage and maintaining good hygiene and the tax rate of the marine engine of general heading 8407 when it is supplied to the defence department, patrol, flood relief and rescue operations.

The coram of Joint Commissioner of Central Tax, Shiva Prasad and Additional Commissioner of State Tax, Senil A.K.Rajan ruled that the marine engine and its spare parts supplied for use in vessels falling under Customs Tariff Heading 8902 shall attract GST at the rate of 5% as per entry at SI No. 252 of Schedule I 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 at the rate applicable under the respective Customs Tariff Headings in which they are classified will apply.

The AAR further ruled the supply of goods or services or both during the warranty period without consideration in the discharge of the warranty obligation is not liable to GST. However, if any additional consideration is received in respect of such supplies of goods or services or both it will be liable to GST at the rate applicable for the goods/services as per the rate schedule.

“The supply of maintenance and repair service of fishing vessels is classifiable under SAC 998714 and is liable to GST at the rate of 18% [9%-CGST + 9%-SGST] as per SI No. 25 (ii) of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. However, where the contract of supply of repair or maintenance specifies that the spare parts and services are to be separately charged and the value of such spare parts and services supplied are shown separately the spare parts and the services shall attract GST respectively at the rates applicable to such spare parts and service as per the GST rate schedule. In such cases, the spare parts is supplied for use as part of fishing vessels will attract GST at the rate of 5% as per entry at SI No. 252 of Schedule I of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017 and the services will be liable to GST at the rate of 18% as per SI No. 25 (ii) of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017,” the AAR said.

The Authority held that the product falls under Customs Tariff Head 3923 and is liable to GST at the rate of 18% as per entry at SI No. 108 of Schedule III of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017.

“The marine engine that falls under Customs Tariff Heading 8407 when supplied for use as part of vessels falling under Customs Tariff Heading 8906: Other vessels, including warships (which aptly covers vessels for Defence and other agencies used for patrol, relief and rescue operations) shall attract GST at the rate of 5% [2.5%-CGST + 2.5% SGST] as per entry at SI No. 252 of Schedule I of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017,” the AAR said.

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