Central Tax Circulars

CGST Circular 113/2019

To,

Principal Chief Commissioners/ Principal Directors General, Chief
Commissioners/ Directors General

Principal Commissioners/ Commissioners of Central Tax and Customs

Madam/ Sir,

Subject: Clarification regarding GST rates & classification (goods)–reg.

1) Representations have been received seeking clarification in respect of
applicable GST rates on the following items:

(i) Classification of leguminous vegetables such as grams when subjected to
mild heat treatment

(ii) Almond Milk

(iii) Applicable GST rate on Mechanical Sprayer

(iv) Taxability of imported stores by the Indian Navy

(v) Taxability of goods imported under lease.

(vi) Applicable GST rate on parts for the manufacture solar water heater and
system

(vii) Applicable GST on parts and accessories suitable for use solely or
principally with a medical device

2) The issue wise clarifications are discussed below:

3) Classification of leguminous vegetables when subject to mild heat treatment
(parching):

3.1. Doubts have been raised whether mild heat treatment of leguminous
vegetables (such as gram) would lead to change in classification.

3.2. Dried leguminous vegetables are classified under HS code 0713. As per the
explanatory memorandum to the HS 2017, the heading 0713 covers leguminous
vegetables of heading 0708 which have been dried, and shelled, of a kind used
for human or animal consumption (e.g., peas, chickpeas etc.). They may have
undergone moderate heat treatment designed mainly to ensure better preservation
by inactivating the enzymes (the peroxidases in particular) and eliminating
part of the moisture.

3.3. Thus, it is clarified that such leguminous vegetables which are subjected
to mere heat treatment for removing moisture, or for softening and puffing or
removing the skin, and not subjecting to any other processing or addition of
any other ingredients such as salt and oil, would be classified under HS code
0713. Such goodsif branded and packed in a unit container would attract GST at
the rate of 5% [S. No. 25 of notification No. 1/2017- Central Tax (Rate) dated
28.06.2017]. In all other cases such goods would be exempted from GST [S. No.
45 of notification No. 2/2017- Central Tax (Rate) dated 28.06.2017]. 3.4.
However, if the above dried leguminous vegetable is mixed with other
ingredients (such as oil, salt etc) or sold as namkeens then the same would be
classified under Sub heading 2106 90 as namkeens, bhujia, chabena and similar
edible preparations and attract applicable GST rate.

4) Classification and applicable GST rate on Almond Milk:

4.1. References have been received as to whether “almond milk” would be
classified as “Fruit Pulp or fruit juice-based drinks” and attract 12% GST
under tariff item 2202 99 20.

4.2. Almond Milk is made by pulverizing almonds in a blender with water and is
then strained. As such almond milk neither constitutes any fruit pulp or fruit
juice. Therefore, it is not classifiable under tariff item 2202 99 20.

4.3. Almond milk is classified under the residual entry in the tariff item 2202
99 90 and attract GST rate of 18%.

5) Applicable GST rate on Mechanical Sprayer:

5.1 Representations have been received seeking clarification on the scope and
applicable GST rate on “mechanical sprayers” of entry No. 195B of the Schedule
II to notification No. 1/2017- Central Tax (Rate), dated 28.06.2017. The entry
No. 195B was inserted vide notification No. 6/2018- Central Tax (Rate), dated
25th January, 2018.

5.2 All goods of heading 8424 i.e. [Mechanical appliances (whether or not
hand-operated) for projecting, dispersing or spraying liquids or powders; spray
guns and similar appliances; steam or sand blasting machines and similar jet
projecting machines (other than fire extinguishers, whether or not charged)]
attracted GST @18% [S.No.325 of Schedule III] till 25th January, 2018.
Subsequently, keeping in view various requests/ representations, the GST
Council in its 25th meeting recommended 12% GST on mechanical sprayers.
Accordingly, vide amending notification No. 6/2018- Central Tax (Rate), dated
25thJanuary, 2018, GST at the rate of 12% was prescribed (entry No. 195B I
Schedule II of notification No. 1/2017-Central Tax (Rate) dated 28.6.2017)
Simultaneously, mechanical sprayers were excluded from the ambit of the said S.
No. 325 of Schedule III. 5.3 Accordingly, it is clarified that the S. No. 195B
of the Schedule II to notification No. 1/2017- Central Tax (Rate), dated
28.06.2017 covers “mechanical sprayers” of all types whether or not hand
operated (like hand operated sprayer, power operated sprayers, battery operated
sprayers, foot sprayer, rocker etc.).

6) Clarification regarding taxability of imported stores by the Indian Navy:

6.1 Representation has been received from the Indian Navy seeking clarification
on the taxability of imported stores for use of a ship of Indian Navy.

6.2 Briefly stated, in accordance with letter No. 21/31/63-Cus-IV dated 17 Aug
1966 of the then Department of Revenue and Insurance, the Indian Naval ships
were treated as “foreign going vessels” for the purposes of Customs Act, 1962,
and the naval personnel serving on board these naval ships were entitled to
duty-free supplies of imported stores even when the ships were in Indian
harbour. However, in the GST era, no such circular has been issued regarding
exemption from IGST on purchase of imported stores by Indian Naval ships. The
doubt has arisen as there is a no specific exemption, while there is a specific
exemption for the Coast Guard (vide S. No. 4 of notification No.
37/2017-Customs dated 30.6.2017). Similar exemption has not been specifically
provided for Navy.

6.3 Indian Naval ship stores are exempted from import duty in terms of section
90(1) of the Customs Act, 1962. Further, as per section 90(2), goods “taken on
board a ship of the Indian Navy” shall be construed as exported to any place
outside India. Also, section 90(1) and 90(3) of the Customs Act, 1962 provides
that imported stores for the use of a ship of the Indian Navy and stores
supplied free by the Government for the use of the crew of a ship of the Indian
Navy in accordance with their conditions of service will be exempted from duty.

6.4 Accordingly, it is clarified that imported stores for use in navy ships are
entitled to exemption from GST.

7) Clarification regarding taxability of goods imported under lease:

7.1 Representations have been received seeking clarification on the taxability
of goods imported under lease.

7.2 In respect of goods imported on temporary basis, aircrafts, aircraft
engines and other aircraft parts imported into India under a transaction
covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Service
Tax Act, 2017 are exempted from IGST vide S. No. 547A of notification No.
50/2017-Customs dated 30.06.2017, subject to condition No. 102, which reads as
under :-

The importer, by the execution of bond, in such form and for such sum as may be
specified by the Commissioner of Customs, binds himself, –

(i) to pay integrated tax leviable under section 5(1) of the IGST Act, 2017 on
supply of service covered by item 1(b) or 5 (f) of Schedule II of the Central
Goods and Services Act, 2017;

(ii) not to sell or part with the goods, without the prior permission of the
Commissioner of Customs of the port of importation;

(iii) to re-export the goods within three months of the expiry of the period
for which they were supplied under a transaction covered by item 1(b) or 5 (f)
of Schedule II of the Central Goods and Services Act, 2017;

(iv) to pay on demand an amount equal to the integrated tax payable on the said
goods but for the exemption under this notification in the event of violation
of any of the above conditions.

7.3 Similarly, rigs and ancillary items imported for oil or gas exploration and
production taken on lease by the importer for use after import have also been
exempted from IGST vide S. No. 557A of the said notification. Subsequently, all
goods, vessels, ships (other than motor vehicles) imported under lease, by the
importer for use after import, were also exempted from IGST vide S. No. 557B of
the said notification. Both these entries are subject to the same condition No.
102 of the said notification.

7.4 The intention of S. No. 557 A and 557 B is to exempt from IGST the imports
of goods under an arrangement of supply of service covered by item 1(b) or 5(f)
of Schedule II of the CGST Act, 2017 so as to avoid double taxation.

7.5 Accordingly, it is hereby clarified that the expression “taken on
lease/imported under lease” (in S. No. 557A and 557B respectively of
notification No. 50/2017-Customs dated 30.06.2017) covers imports under an
arrangement so as to supply services covered by item 1(b) or 5(f) of Schedule
II of the CGST Act, 2017 to avoid double taxation. The above clarification
holds forsuch transactions in the past.

7.6 Further, wordings of S. No. 557A and 557B of notification No.
50/2017-Customs dated 30.6.2017, have been aligned with Condition No. 102 of
the said notification [vide notification No. 34/2019-Customs dated 30.09.2019
w.e. f 01.10.2019] to address the concerns raised.

8) Applicability of GST rate on parts for the manufacture solar water heater
and system:

8.1 Representations have been received seeking clarification on applicable GST
rate on Solar Evacuated Tubes used in manufacture of solar water heater. While
5% GST rate applies to parts used in manufacture of Solar Power based devices
(S.No. 234 of Notification No. 1/2017 -Central tax (Rate) dated 28.06.2017),
doubtshave been raised in respect of parts of Solar water heaters on the ground
that Solar Based Devices are being considered only as devices which run on
Solar Electricity.

8.2 As per entry No 232, solar water heater and system attracts 5% GST.
Further, as per S. No. 234 of the notification No. 1/2017-Central Tax (Rate)
dated 28.6.2017, solar power-based devices and parts for their manufacture
falling under chapter 84, 85 and 94 attract 5% concessional GST. Solar Power
based devices function on the energy derived from Sun (in form of electricity
or heat). Thus, solar water heater and system would also be covered under S. No
234 as solar power device. Thus, Solar Evacuated Tubes which falls under
Chapter 84 and other parts falling under chapter 84, 85 and 94, used in
manufacture of solar water heater and system would be eligible for 5% GST under
S. No. 234.

8.3 Accordingly, it is clarified that parts including Solar Evacuated Tube
falling under chapter 84, 85 and 94 for the manufacture of solar water heater
and system will attract 5% GST.

9) Applicability of GST on the parts and accessories suitable for use solely or
principally with a medical device:

9.1 Representations have been received seeking clarification on applicability
of GST on the parts of ophthalmic equipment suitable for use solely or
principally with an ophthalmic equipment.

9.2 Briefly stated, medical equipment falling under HS 9018, 9019, 9021 and
9022 attract 12% GST. The imports of parts of ophthalmic equipment suitable for
use solely or principally with an ophthalmic equipment, were being assessed at
12% GST by classifying it under heading 9018. However, objection has been
raised by Comptroller and Auditor General of India (CAG) on the said practice,
suggesting that since such goods were not specifically mentioned in the GST
rate notification, they fall under tariff item 9033 00 00 [residual entry] and
should be assessed at 18% IGST. In this background, representations have been
received from trade and industry, seeking clarification in this matter

9.3 The matter has been examined. As per chapter note 2(b) of the Chapter 90,
parts and accessories of the instruments used mainly and principally for the
medical instrument of chapter 90 shall be classified with the machine only.
Chapter note 2(b) (of Chapter 90) reads as below: –

“2 (b): other parts and accessories, if suitable for use solely or principally
with a particular kind of machine, instruments or apparatus, or with a number
of machines, instruments or apparatus of the same heading (including a machine,
instrument or apparatus of heading 9010, 9013 or 9031) are to be classified
with the machines, instruments or apparatus of that kind;”

9.4 Thus, as per chapter note 2(b), parts of ophthalmic equipment suitable for
use solely or principally with an ophthalmic equipment should be classified
with the ophthalmic equipment only and shall attract 12%.

9.5 In view of the above, it is clarified that 12% IGST would be applicable on
the parts and accessories suitable for use solely or principally with a medical
device falling under heading 9018, 9019, 9021 or 9022 in terms of chapter note
2 (b).

10) Difficulty, if any, may be brought to the notice of the Board immediately.
Hindi version shall follow.