In re Soft turf (GST AAAR Kerala)
AAAR held that impugned goads viz. PVC carpet Mat would fall in the Customs Tariff heading 3918 and applicable rate of GST would be 18% (9% each of CGST and SGST). However, this order is restricted to the types of PVC floor coverings/Carpet/Mats being manufactured by the Applicant as per the manufacturing process submitted and whose sample was produced before us.
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, KERALA
1. The application for advance ruling stands referred under section 98(5) of the CGST/SGST Act, 2017. The application has been filed by M/s Soft turf Alleppey bearing GSTIN 32ADQPG340PIZF The dealer is engaged in the manufacture and supply of floor mats made of poly vinyl chloride known commonly as PVC carpet mats
Brief facts of the case
2. The applicant had sought an advance ruling regarding the classification of PVC carpet mats manufactured by them.
The classification was sought on the issue “Whether PVC carpet mats manufactured and supplied by the applicant will be classifiable under tariff item 5705.00.49 of CTA and attract a tax rate of 12% as per entry 146 of Schedule II of Notification No. 1/2017 – Integrated tax Rate dated 28/6/2017“
3. As there was difference of opinion the same was referred to the appellate authority for advance, ruling U/s 98(5) of the GST Act. Section 98(5) of CGST/SGST Act specifies that where the members of the Authority differ on any question on which the advance ruling is sought, they shall state the point or points on which they differ and make a reference to the Appellate Authority for hearing and decision on such question. The opinion of both the authorities were as follows
3.1. The CGST authority is of the view that the PVC carpet mats are classifiable under Customs tariff Heading 5705.00.49 and is liable to GST @12% as per SL No: 146 of the schedule II of the notification No. 1/2017.
3.2. The SGST authority is of the view that the Floor covering of plastics are covered under HSN 3918 of Customs Tariff Act 1975. Therefore PVC carpet Mate would fall in the entry no: 104A of schedule III thereby attracting tax at the rate of 18%. (28% Upto 14.11.2017 and 182 thereafter as per SI no. 104A of schedule III to Notification 43/2017) .
4. M/s Soft turf had submitted that they are engaged in the manufacture and supply of Carpe s and Mats also known as PVC Carpet mats (herein after re erred as carpets mats). It is submitted that manufacturing of the Carpet mats are undertaken in two stages. The process at Stage I being production of man made monofilament for non-woven carpet top texture, the regular quality carpets mats generally have the following raw material in its compound the plasticizer provides flexibility in the compound has a shape of 26% filler like CaCo3 or limestone powder from the mineral mines share 37%, additives and lubricants such as stearic acid, wax share 1% and suspension grade polyvinyl chloride 36%. The process at Stage II being bonding of non-woven carpet to tenure and backing coating, the backing coating and adhesive are made from emulsion grade polyvinyl chloride 35%, plasticizer, additives, lubricants and fillers consisting 65%, the indications of the quantity of raw material is for a general type carpets and mats.
5. Further that, Under stage I, monofilament yarn with decitex around 270 and filament diameter range 0.38 to 0.75 mm is extruded through a perforated die plate using T-die extrusion. Extrusion is done through 3 to 4 parallel rows along the entire width of T-die and the vertically extruded mono filament in multiples immediately falls in between the grooved rollers in a water bed to form a non-woven carpet top texture and also crimped. The crimped non-woven carpet top texture is taken up in a horizontal direction and would be dried on a conveyer for drying. The top texture height / the thickness of crimped top texture of the carpet can be varied by changing the process parameters, usually in the range of 8mm to 16mm.
6. Further Under Stage 2, the top texture in Stage I is being coated with adhesive / glue and is further made to fall aver the thick backing of PVC and be bonded by glue on a conveyor belt. Then it passes through the heated conveyor through the oven for final bonding between backing and the non-woven top texture. The resultant product is -a product of running length. It is then cut into size as specified by the customer. A detailed manufacturing flow chart was also submitted.
7. The applicant had submitted a test report dtd.01-06-2018 vide number TC/LB/ST/690/2018-19 of The Laboratory of Textile Committee, under the Ministry of Textiles, Govt. of India. In page 2 of the Lab Report, the impugned product HSN has been identified as 5705, carpet made out of PVC with PVC backing, (other carpets and other textile floor coverings, whether or not made up).
8. It is further submitted that the present, application is maintainable under section 97 of the KSGST Act 2017.
9. The applicant contends that the carpet mats manufactured are classifiable under Tariff item 5705 0049 of customs tariff Act 1975 and in view of the entry 146 of the Schedule II of the notification 01/2017 Integrated tax date 28 June 2017, the applicable rate of CST on the PVC carpet is 12%. It is also submitted that this application s preferred on the apprehension that the activity could be considered as a supply of goods under SI Ne: 43 of Schedule IV of the Notification no: 1/2017 Integrated tax (rate) pertaining to Floor coverings made of plastic, which attracted rate of tax at the rat of 28% upto 14/11/2017 and @18% from 15/11/2017 as per si no 104A of Schedule III inserted by notification No: 43/2017-integrated Tax (rate) dated 14/11/2017,
10. It further submitted that the Govt. of India on the recommendations of the Council, has vide Notification No. 1/2017-Integrated Tax (Rate) dtd. 28-06-2017, (as amended) notified the rate of the IGST that shall be levied on the inter-state supply of goods. As per the Notification, the applicable rate of tax that shall be levied on supply of goods, the description of which is specified in the corresponding entry in column (3) of the Schedules under the Notification, filing under the tariff item, subheading, heading or chapter as the case may be, as specified in the corresponding entry in column (2) of the said schedules.
11. Further, explanation (iii) to Notification No. 1/2017-IGST(Rate) provides that “Tariff item”, “sub heading”, “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975. Further, Explanation (iv) provides that the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 inch in the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this Notification.
12. It is submitted that the product proposed to be supplied will be covered under tariff heading 57 of the Customs Tariff Act, 1975, which deals with Carpets and other textile floor coverings.
13. The relevant entries of the Schedules covered there under have been submitted as follows:-
13.1. Schedule II of the Notification No. 1/2017-Integrated Tax (Rate) provides the list of goods that attract IGST at the rate of 12%. SI No. 146 of the Notification reads as below:
