In re Rishab Industries (GST AAR Maharashtra)
Question- Whether transformers supplied to Indian Railways can be classified as ‘Parts of railway or tramway locomotives or rolling stock’ under HSN ‘8607’ and thereby subjected to GST@ 5% or the transformers shall be categorized under HSN 8504 and subjected to GST@ 18%?
Answer- Transformers’ supplied to Indian Railways, by the applicant, are covered under HSN ‘8504’ and Sr. No. 375 of Schedule III of the Notification 1/2017 Central Tax (Rate) dated 28.06.2017 and therefore subjected to GST@ 18%.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MAHARASHTRA
The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services 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 railway or tramway locomotives or rolling stock’ under HSN ‘8607’ and thereby subjected to GST@ 5% or the transformers shall be categorized under HSN 8504 and subjected to GST@ 18%?”
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to “GST Act” would mean CGST Act and MGST Act.
2. FACTS AND CONTENTION – AS PER THE APPLICANT
The submissions, made by the applicant is as under:-
2.1 Applicant is manufacturer of Transformers, Magnetic Components & Panels for various Industries. Applicant has developed Transformers, which have been approved by the Research Design and Standards Organisation (RDSO). These transformers are fitted underslung (suspended from an upper support) to the passenger coaches (commonly referred to as ‘LHB’ Coaches) that are manufactured by the various coach manufacturing factories in India. These Transformers are Electro-mechanical devices i.e. Transformer is fitted in a Stainless Steel Enclosure which is further fitted under the LHB Coaches/ Rolling Stock. These Transformers are the source of power to the Coach for Fans, AC, Lights and Charging Points within the coach. Inputs which are used to manufacture transformers are taxed @18%, namely, a) Super Enamelled Copper Strips and Wires, b) Electrical Steel Cold Rolled Grain Oriented Silicon Steel Lamination, c) Stainless Steel SS304 Fabricated Enclosure and d) Other Insulating Items.
2.2 According to applicant, Transformers fall under the HSN 8504 – ‘Electrical Transformers, Static Convertors (E.g.: Rectifiers) and Inductors’ which is taxed @ 18%. There is another HSN 8607 – Parts of railway or tramway locomotives or rolling-stock; such as Bogies, bissel-bogies, axles and wheels, and parts thereof which is taxed @ 5%.
2.3 Applicant has submitted that Maintenance Manual for LHB Coaches was issued by the Indian Railways Centre for Advanced Maintenance Technology (CAMTECH), Gwalior in April 2013. As per Chapter 6 – Air Conditioning and Train Lighting in the manual there is a mention of the End on Generation (EOG) system which states that ‘EOG system envisages providing power car in front and rear end of a rake of coaches for power requirement between them. These coaches are equipped with 60kVA step down transformers for stepping down 750 V to lower power supply as per the requirements of power supply. The Power Cars at both ends take care of the entire load of the whole rake, which includes air conditioning, light and fan circuit, emergency battery charger circuit and pantry equipment. A transformer is also equally important in the functioning of the MONO-BLOCK PUMP for ensuring water supply in the coach and typically, a 60 kVA transformer is required for the functioning of the water pump. Almost every power circuit diagram in the manual has a mention of the Transformer as an important link between receiving power from the feeder/ primary source and then moving the power to the desired location within the coach for the critical electrical functions to be operated.
2.4 Applicant has also cited The Vocational Training report on the Rajdhani Express issued by the Eastern Railways in 2015 which states that: The entire power required for AC. system, lighting system, Pantry Car power is delivered by the DG sets established in the Power Car. The DG. sets produce 750 V. 3 phase AC. power for low transmission loss. The 750 V. AC. power then dropped down to 415 V. 3 phase AC. power by two 60 kVA transformers for two DG sets. This 415 V. AC. power is moved to the metering and control section. According to original German designing the generated 750 V. AC. power goes to two 60 KVA. transformers by two feeders from two DG sets. The transformed power is supplied for various functions some as critical as the operation of the ‘Anti-Skid Device’. Typically, the axles/ wheels of the coaches are moved forward by the pull of the locomotive (engine). However, when the same need to be brought to an urgent halting position, brakes need to applied to all the wheels in an emergency situation. Anti-Skid Devices act as a pulling device to avoid the wheels of the coach to skid away/ de-rail in the event of an urgent braking situation making it one of the most important protection devices/ systems of the railways.
2.5 Further, applicant has cited the Introductory Handbook on Train -18 issued by the Indian Railways Centre for Advanced Maintenance Technology, Gwalior issued in November 2018 which quotes that Trailing coach has the pantograph for current collection, vacuum circuit breaker and HV isolator mounted on the roof. For operation of the 16 car, two pantographs will be used. It also consists of auxiliary converter unit and power transformer mounted under-slung. Power to Line and Traction Convertor units (LTC) of both motor coaches is distributed from the same power transformer. Auxiliary converter feeds the total load of four coaches. It also consists of passenger saloon area, pantry, RMPU, mono block pump controller, electrical cabinet and various end wall panels. It is an air-conditioned coach.
2.6 The primary function of a transformer is to transform the electric current in a form to make it fit the requirements of a circuit and/ or its end use of power. The primary objective of a transformer in relation to railways is to transform the high voltage power pulled by the Pantograph (overhead units that connect to the power lines) to the low voltage as required by the coaches either to move the wheels or for other purposes like running the air conditioner units etc. Without a transformer, electricity supply cannot be controlled thereby making it a very critical ‘Part’ in the Electrical Circuit of a coach/bogie. Applicant also refers to the Specifications that are shared by the Research Designs and Standards Organisation (RDSO) in so far as the requirements for a Transformer are concerned, wherein the Scope covers the design, manufacturing, test, supply requirements of the Transformers. The transformers also need to meet the Service Conditions that are very typical to railways like ; Temperatures ranging from -5° to 55°C; Train Speed upto 200 km/h ; Rainfall from 1750 mm to 6250 mm ;Relative Humidity upto 95%
2.7 Applicant has also submitted that transformers that are manufactured for railways have a very specific use and are also very integral to the electrical system of the coach/ bogies. Thus Transformers merits its classification under the Heading (HSN) – 8607 – as ‘Parts of railway or tramway locomotives or rolling-stock’ despite a separate classification heading available for Transformers.
2.8 They have referred to Circular No 30/4/2018-GST dated 25 January 2018 issued by the Department of Research (Tax Research Unit) wherein it was categorically clarified as under:
– Only the goods classified under Chapter 86, supplied to the railways attract 5% GST rate with no refund of unutilized input credit and
– Other goods (falling in any other chapter) would attract the general applicable GST rates to such goods, under the aforesaid notifications, even if supplied to the railways.
03. CONTENTION- AS PER THE .JURISDICTIONAL OFFICER:-
The submission, of the jurisdictional officer is as under:-
3.1 Sr.No. 375 of Notification No. 1/2017-C.T.(Rate) dt. 28.06.2017 is as under:
