This is in furtherance to our update NITYA’s Insight | Judgement Update | Issue 123 | Classification of parts and accessories of motor vehicle dated May 18, 2020.

This is to apprise you regarding recent decision of Authority for Advance Ruling (‘AAR’), Gujarat in the case of Shree Mohit Rameshpal Gupta, 2020-VIL-159-AAR. The issue related to classification and applicable GST rate on fuel conversion electronic parts.

The applicant was engaged in manufacturing fuel conversion electronic parts such as changeover switch, emulator, timing advance processor and pressure gauge which were parts of CNG / LPG conversion kits.

The AAR observed that these goods are used to convert motor vehicles to run on alternate fuel and hence, are parts of motor vehicles. Therefore, such goods will be classified under Heading 8708 of the Customs Tariff Act, 1975 (‘Customs Tariff’) and shall attract GST rate of 28%.

NITYA Comments: 

The ruling of AAR is incorrect since it failed to consider Note 2 to Section XVII of the Customs Tariff which covers Heading 8708. This Section Note specifically excludes certain parts and accessories, including products falling under Chapter 84 (engine and its parts). Further, it is pertinent to refer to decision of AAR, Karnataka in case of Sagas Autotec Private Limited, 2019-VIL-370-AAR which held that CNG / LPG conversion kits are parts of engines and shall be classified under Heading 8409. Similar view was taken by CESTAT in the case of Transenergy Limited v. CCE, 2008 (9) TMI 130 (Tri.-Chennai). 

Thus, CNG / LPG conversion kits will be classifiable under Heading 8409 and individual parts of such kits shall be classified basis their description and function. 

The classification of parts of motor vehicles continue to remain disputed under GST regime due to significant difference in rate of tax (Heading 8708 attracting 28 percent and other Headings attracting 18 percent).