Rate of GST on parts and accessories of motor vehicles

by | Jan 27, 2021 | Insight

We apprised you that the revenue is disputing classification of parts and accessories of motor vehicles as adopted by taxpayers. As per the revenue, these goods fall under Headings 8708 and 8714 which cover ‘parts and accessories of motor vehicles’ and attract Basic Customs Duty (BCD) of 15 percent and GST of 28 percent vis-à-vis other Headings which usually attract BCD of 7.5 percent / 10 percent and GST of 18 percent.

It is pertinent to note that several advance rulings have been passed under GST regime on classification of automotive components which has added more debate to this issue. Some recent rulings given by the Authority for Advance Ruling (‘AAR’) on this issue, are encapsulated below: 

Advance Ruling

Product

Taxpayer’s classification

Revenue’s classification

Classification upheld

Ruling

A Raymond Fasteners India Pvt. Ltd., 2021-VIL-01-AAAR

Fasteners

7318

8708

8708

The Appellate AAR (‘AAAR’) classified fasteners under Heading 8708 basis Supreme Court’s decision in the case of G.S. International Ltd. V. CCE, 2003-VIL-42-SC-CE.

 

NITYA Comments: The AAAR did not refer to Section Notes of Section XVII, which provide that goods of Heading 7318 (being parts of general use of iron and steel) will not be classified under Heading 8708.

 

Shiroki Technico India Pvt. Ltd., 2021-VIL-15-AAR

Seat adjusters

9401

8708

8708

The AAR rejected the Applicant’s contention that seat adjusters formed an essential and integral part of ‘Seats’. It classified these goods under Heading 8708 instead of classifying them as parts of seats under Heading 9401.

 

Shree Mohit Rameshpal Gupta (Ramesh Corporation), 2020-VIL-159-AAR

Timing advance processor (ECU), Change-over switch, Pressure gauge etc.

NA

8708

8708

The AAR held that the goods are classifiable under Heading 8708 without any reasoning.

 

NITYA Comments: Since these products have individual functions of their own, they merit classification under specific Headings like 8481, 8543 or 9032.

Note: There are other advance rulings wherein AARs dealt with classification of disc brake pads (Heading 6813), instrument clusters (Heading 9026 / 9029), plastic door handles and glove-box locking (Heading 3926) etc.

NITYA Comments: 

Classification of parts and accessories of motor vehicles has always been a contentious issue under Indirect Tax regime. A perusal of aforesaid rulings under GST regime, indicates that the issue is far from getting settled in near future. The revenue is classifying all goods under Heading 8708 without going into nature of goods or correct legal position. The revenue has also started seeking information from automotive OEMs as well as part / component manufacturers as pre-cursor to litigation on this issue. Hence, taxpayers are advised to re-analyze correct classification of parts and accessories of motor vehicles imported or supplied by them. 

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