In re Joshna Chandresh Shah (GST AAR Tamilnadu)
In M/s Navbharat Imports [ORDER No.35/ARA/2021 dated September 30, 2021], M/s Navbharat Imports (Applicant) has sought an advance ruling on the issue that when Physical force is the primary action of a toy and if the light and the music are ancillary to it, then whether it is to be classified under Electronic Toys or other than Electronic Toys.
Factually, the Applicant is regular importers and traders of toys from various countries, and they sell these goods in India in retail as well as through E-Commerce platforms. They also intend to manufacture these toys in India in future. The toys imported include both electronically operated toys as well as manually operated toys in which electronic parts were fitted for providing light, music and horn etc.
The Applicant has stated that Toys like tricycles, scooters. pedal cars etc. including parts and accessories thereof other than electronic toys are chargeable to applicable GST rate of 12% under Sl.No.228 of Schedule II of Notification 01/2017 CT (rate) (“Goods Rate Notification”) and 18% under Sl. No. 440 of Schedule III for Electronic toys.
The Hon’ble Tamil Nadu Authority for Advance Ruling (“the TN AAR”) ruled that Children Scooter, Activity Ride-on, Smart Tri-cycle and Kick Scooter in which physical force is the primary action and contains an in built electronic circuit are Electronic Toys are chargeable to the applicable GST Rate of CGST @ 9% & SGST 9% as per Sl. No. 440 of Schedule-III of Goods Rate CGST & SGST Notification.
Further, the TN AAR find that the products are designed to develop gross motor skills in as much as they are designed to use the physical force and can be enjoyed by either pedaling or by pushing with the leg and also fine motor skills like blinking, discrete tasks of switching on/off the music/light etc., provided through the inbuilt electronic circuit, powered with the electrical energy (battery)/ induction force. Both the functions of the toys are targeted to develop a certain skill while amusing the child playing with it. Therefore, the TN AAR hold that the products in hand are Electronic Toys and the applicable GST Rate is 18% as per Sl. No. 440 of Schedule III of the Goods Rate Notification.
Also Read AAAR order- 18% GST applicable on Electronic Toys as against 12% on other Toys
FULL TEXT OF THE ORDER OF AUTHORITY OF ADVANCE RULING,TAMILNADU
Note: Any appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
M/s Navbharat Imports, B-3,32/34, Golden Primrose Apartments, Saravana Street, T.Nagar, Chennai-600017 (hereinafter called the ‘Applicant’) are registered under the GST Vide GSTIN 33AAKPS4623H.1ZN. They have sought Advance Ruling on the following question:-
When Physical force is the primary action of a toy and if the light and the music are ancillary to it then whether it is to be classified under “electronic Toys” or “other than Electronic Toys”
The Applicant has submitted the copy of application in Form GST ARA – 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/ each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.
2.1. The applicant has stated that they are regular importers and traders of toys from various countries, they sell these goods in India, in retail as well as through E Commerce platforms. They also intend to manufacture these toys in India in future. The toys imported include both electronically operated toys as well as manually operated toys in which electronic parts were fitted for providing light, music and horn etc. Some of the toys and their functionalities are listed below:-
Children’s Scooter SC-007: It is a scooter toy applicable for the age range between 3-5 years old in which the toddler will be placed in the seat provided and has to move with the wheels provided only by applying pressure with the legs and handle bar shall be used to change the direction. This toy is provided with light in the handle bar and the music.
Activity Ride-on: It is a car toy applicable for the age ranging from 12 Months-36 Months old. The toddler will be placed in the seat provided and has to lie pushed by the other person for the movement and the steering provided shall be used for changing the direction. This toy is provided with electronic lights and Music in the form of buttons present in the steering.
Smart Tri-Cycle : It is a tri-cycle toy which is applicable for the age range up to 18 months. The toddler has to be placed in the scat provided and has to pedal for the movement of the tri-cycle. The handle bar provided shall be used for direction also in the handle bar there are buttons present for light, horn and Music.
Kick Scooter : It is a tri-cycle applicable for the age ranging from 3-14 years. This tri-cycle has to be driven upon standing on one leg in the tri cycle and pushing with the other leg. The direction of the tri-cycle shall be changed by turning the handle bar. The bottom of this tri-cycle is provided with battery provision for light and music.
2.2 On interpretation of law, the applicant has stated that in so far as toys are concerned they are classified under chapter heading 95.03 (Tricycles, Scooters, Pedal Cars and similar wheeled toys; dolls’ carriages; dolls; other toys; reduced-size (“scale”) models and similar recreational models, working or not; puzzles of all kinds.) The applicable rate of tax is 12% under SI.No.228 of Schedule II of Notification No. 01/2017 C.T.(Rate) dated 28.06.2017 (Toys like tricycles, scooters, pedal cars etc. (including parts and accessories thereof) [other than electronic toys] and 18% under SI.No. 440 of Schedule III (Electronic toys like tricycles, scooters, pedal cars etc. (including parts and accessories thereof). The applicant has stated that the toys imported and sold by them are meant for engaging the kids in the activity of enjoyment and recreation rather than serious or practical purpose. It is a toy used by the child to play with. These toys are equipped with music and light facility powered by a small pencil cell. It is solely provided for attracting the children towards the toys. These toys are manually operated and remain fully operational and functional even without light, music or horn. Electronic circuits are dedicated only for the purpose of enhancing quality of entertainment through light, music, horn etc. and it does not interfere with operational features of the toy.
The applicant has placed reliance on the following ease laws, wherein it was held that while classifying goods the common parlance of the goods has to be applied.
> Indo International Industries Vs Commissioner Of Sales Tax, U.P. 1981 (8) E.L.T. 325 (S.C.)
> Ramavatar Bhudaiprasad Etc. vs. Assistant Sales Tax Officer, Akola (1961) 12 ST 286 (SC)
> Commissioner of Sales Tax, Madhya Pradesh vs. Jaswant Singh Charan Singh (1967) 19 STC 469 (SC)
> Commissioner of Central Excise vs. Connaught Plaza Restaurant (P) Ltd. (2012) 13 SCC 639 (SC).
> Ponds India Ltd. Vs. Commissioner of Trade Tax, Lucknow 2008 (5) TMI 46 – SUPREME COURT
Further, to substantiate their interpretation the applicant has relied on the decision of Hon’ble Maharashtra Tribunal in Nandi Marketing Vs. The State of Maharashtra-VAT Appeal No.661 of 2017- Wherein the tribunal has held as follows: –
” 16. For the purpose of coming to a correct conclusion in the instant case, if common parlance test is applied, it is crystal clear that a customer will never buy articles such as Baby Walker, Pull Push Car, Swing Car and Kick Scooter in the present case as electrical or electronic toy. When the word electric’ or ‘electronic’ toy is used, it implies that the movement of the toy is powered either by electronic circuit or electricity. In the instant case, the toys are not powered by electricity or electronic circuit. For the purpose of playing with the toys, physical strength and energy of the child is required to he applied. For this simple reason, we are of the firm opinion that order passed by the Advance Ruling Authority is incorrect and the same is required to be struck down.”
The applicant has stated that SI.No.440, of the GST Tariff @18% shall apply to the goods that are those which are electronically operated toys. Electronically operated means the toys primary action shall be administered only by electrical supply. However, the toys that are imported and sold by them are those which are operated manually by applying physical force and the electronic components that are attached are ancillary to the primary function of the toys. In view of the above facts, the applicant has sought the authority to clarify the rate of GST payable for their products.
3.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the applicant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant consented and the hearing was held on 17.09.2020. Shri. S.Murugappan, the authorized representative, appeared for virtual hearing. He stated that they are seeking ruling on the classification of the four products raised in the application. He reiterated the written submissions. He undertook to furnish the fliers used for advertising the products; process of manufacture (proposed); copies of bill of entry for imports; Copies of sales invoice(local) and the decision of the Hon’ble Maharashtra Tribunal in Nandi Marketing vs State of Maharashtra relied upon by them.
3.2 The applicant vide their email dated 01.10.2020 stated that they had not made any imports so far of the items under reference in the application and procure from other importers for trading at present. They submitted the following documents:-
> VAT APPEAL NO.661 OF 2017 M/s Nandi Marketing vs The State of Maharashtra
> Bill of entry No. 4394859 dated 07.08.2019 of Nandi Marketing along with import invoice covering import of Cosmic Kick Scooters of various models of COSMIC KICKSCOOTER KS-630,661,231,530
> Bill of entry No.9784180 dated 24.01.2019 of Nandi Marketing for Push Ride (Activity Ride)
> Local sales Invoice through Amazon.in Tax Invoice for supply by Navbharat Imports covering Baby Ride, Smart Tricycle and Kick Scooter
> Advertisement Brochure for Smart Tricycle, Cosmic Kick Scooter and EZ Ride
3.3 The applicant, further, vide their letter dated 19.11.2020 stated that no direct imports have been made by them,; they buy from another importer M/’s Nandi Marketing and based on the request made by the applicant, a copy of bill of entry was provided to the applicant by the importer.; With regard to the manufacturing process, they submitted that the proposal is for proceeding with the manufacture at a future date. Hence the details could not be furnished earlier. They have submitted the flow chart with regard to the proposed manufacture of four products.
4.1 The Slate Jurisdictional officer vide their letter dated 01.02.2021 has submitted their remarks as below:
” Even though physical force is the primary action of a toy and if the light and music are ancillary to it, but the light and music are operating by the battery and assembled with the toy. Hence, it is to be classified as “Electronic toys”
4.2 The State Jurisdictional officer was asked to verify the place of business of the applicant and submit a detailed report on the products for which the ruling is sought.
4.3 The State Jurisdictional officer vide their letter dated 04.08.2021 submitted the following:-
> The place of business of M/s. Navbharat Imports, Flat No. B3, 3rd Floor, Golden Primrose Apartments, No.32-34, Saravanan Street, T.Nagar, Chennai-17 was visited on 09.08.2021 at 10.30AM. At the time of visit the Proprietrix Trnt. Joshna Chandresh Shah was present and displayed the goods for which they have applied Advance ruling.
> The following children’s toys which were produced were verified physically and the remarks on functioning of the toys are as below:-
