In Advance Ruling No. KER/15/2023 -AAR- AAR (Kerala) rules 5% GST rate for marine parts used in fishing/floating vessels; Replacement of parts without consideration during warranty period not liable for GST
Members Dr S.L. Sreeparvathy & Abraham Renn S. [03-03-2023]

Read Order: In Re: M/s. Bright Metal Works

Chahat Varma

New Delhi, July 31, 2023: The Kerala bench of the Authority for Advance Rulings (AAR) has ruled that Marine Propellers, Rudder Sets, Stern Tube Set, SS Propeller Shaft, and MS Shafts, when supplied for use as part of fishing vessels falling under Customs Tariff Headings 8902 or vessels falling under Customs Tariff Headings 8901, 8904, 8905, 8906, and 8907, will attract GST at the rate of 5%.

M/s. Bright Metal Works, the applicant, engaged in the manufacturing of various parts used in fishing/floating vessels, sought an Advance Ruling on several tax-related matters. They requested clarification on the tax rate applicable to marine propellers, stern tube set, rudder set, SS propeller shaft, MS shaft for couplings, intermediate shafts, and cutlass rubber bushes. Additionally, they sought guidance on whether the replacement of parts during the warranty period should be considered as a supply under GST. Lastly, they asked if they were eligible to claim an 18% input tax credit on the purchase of raw materials. They also requested a ruling specifying the HSN code for the cutlass rubber bush.

The AAR observed that in the case of warranty replacements, where separate consideration was not charged, the supply of goods was incidental to the original supply. The value of the original supply included the charges for the warranty supply as well. Therefore, when goods were supplied without any additional consideration to fulfil the warranty obligation, it was not liable for GST. However, if any additional consideration was received for such warranty replacements, it will be subject to GST at the applicable rate as per the rate schedule.

Regarding the eligibility to claim input tax credit on the purchase of raw materials, the AAR stated that since the applicant's output supply was liable for GST, albeit at a lower rate and not exempted, they were eligible to avail the credit of tax paid on inputs, input services, and capital goods. However, this eligibility was subject to the conditions and limitations prescribed under Sections 16, 17, and 18 of the Central Goods and Services Tax Act.

Lastly, the AAR ruled that Cutlass Rubber Bush fell under CTH 4016 99 60, which pertained to rubber bushes, and was liable to GST at the rate of 18%. However, if the Cutlass Rubber Bush was supplied for use as parts of goods falling under Heading 8901, 8902, 8904, 8905, 8906, or 8907, it was liable to GST at the rate of 5%.