18% GST applicable on Transformers supplied to Indian Railways: AAR

Case covered:

RISHAB INDUSTRIES

Facts of the case:

The present application has been filed under Section 97 of the Central Goods and Service Tax Act 2017 and the Maharashtra Goods and Service Tax Act 2017( hereinafter referred to as ”the CGST Act and MGST Act”) by M/s RISHAB INDUSTRIES, seeking an advance ruling in respect of the following question.

”Whether transformers supplied to Indian Railways can be classified as ‘Parts of the railway or tramway locomotives or rolling stock’ under HSN ‘8607’ and thereby subject to GST @ 5% or the transformers shall be categorized under HSN ‘8504’ and subjected to GST@ 18%?

Observations:

We have gone through the facts of the case, written contention made by the applicant and jurisdictional officer. The issue raised before us is in respect to the classification of the manufactured product i.e., Transformer, supplied to railways and rate of tax thereon, which would be on the lines thus-

We find from the above that, the classification of goods under Chapter Heading 8607 does not include ‘Electrical Transformer’. It only refers to parts of the railway such as bogies, Bissel-bogies, axels, wheels, brakes, hooks, and parts thereof, in a general way; whereas, Chapter Heading 8504 clearly includes ‘Electrical Transformers, static converters( for example, rectifiers) and inductors’. Note 2(f) to XVII mentions that the expressions ”parts” and ”parts and accessories” do not apply to electrical machinery or equipment(Chapter 85), whether or not they are identifiable as goods of this section. Further, Note 2 to Chapter 86 mentions that ”Heading 8607 applies, inter alia, to (a) axles, wheels( running gear), metal tyres, hoops and hubs and other parts of the wheels; (b) frames, underframes, bogies and Bisel bogies; (c) axle boxes, brake gear; (d) buffers for rolling stock; hooks and other coupling gear and corridor connections; and (e) coachwork. Thus from a reading of Note 2(f) to Section XVII of the GST Tariff and Note 2 to Chapter 86 of GST Tariff, the applicant’s product, ‘Transformers’ are classified under HSN 8504.

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