In re Sivantos India Private Limited (GST AAR Karnataka)
Q1. Classification of parts and accessories suitable for use solely with the hearing aids?
A1. The parts & accessories of hearing aids are covered specifically under heading 9021 9010 and thus merit classification under the said heading.
Q2. The rate of tax (GST) applicable on supply of such parts & accessories of hearing aids is 18% in terms of entry no.453 of Schedule III to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017.
A2. Rate of tax on supply of such parts and accessories which are suitable for use solely with the hearing aids
Q3. The entry No. 142 of Notification 2/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to the supply of parts & accessories of hearing aids and thus the said goods are not entitled for exemption.
A3. Whether such parts and accessories, suitable for use solely with the hearing aids are exempt by virtue of Sl. No. 142 of 2/2017-CT(R) as amended from time to time.
AAAR Order: Parts & accessories of hearing aids falling under tariff item 90219010 not entitled for GST exemption
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KARNATAKA
ORDER UNDER SECTION 98(4) OF THE CGST ACT, 2017 AND UNDER SECTION 98(4) OF THE KGST ACT, 2017
M/s. Sivantos India Pvt. Ltd.,(herein after referred to as ‘Applicant’), # 78, Salarpuria Sattva Magnificia – Phoenix, 4th Floor, Near Tin Factory, Old Madras Road, Doorvani Nagar, Bengaluru – 560 016, having GSTIN 29AACCS0638P1ZV, have filed an application for Advance Ruling under Section 97 of CGST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read with rule 104 of KGST Rules, 2017, in form GST ARA-01 discharging the fee of Rs. 5000/- each under the CGST Act, KGST Act.
2. The applicant is engaged in the business of trading of hearing aids and their parts 86 accessories; registered in the states of Karnataka, Maharashtra, West Bengal and Delhi.
3. In view of the above, the applicant has sought advance ruling in respect of the following questions:-
a) Classification of parts 8& accessories suitable for use solely with the hearing aids
b) Rate of tax on supply of such parts & accessories which are suitable for use solely with the hearing aids.
c) Whether such parts 86 accessories, suitable for use solely with the hearing aids, are exempt by virtue of SI.No. 142 of Notification 2/2017-Central Tax (Rate) dated 28.06.2017 as amended from time to time
4. BRIEF FACTS OF THE CASE: The applicant furnishes the following facts relevant to the issue:
4.1 The applicant supplies the parts 86 accessories to the domestic market, which are said to be suitable for use solely with the hearing aids, which are manufactured by their parent company abroad and imported by the applicant. The applicant claims that the said parts & accessories are designed by their parent company to make them suitable for use solely with the hearing aids with no other alternate use and hence these are suitable for use solely with the hearing aids.
4.2 The applicant is supplying the parts 8& accessories of hearing aids on classifying the same under heading 90219010 on charging 18% GST, in terms of entry No.453 of Schedule III to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017
4.3 The applicant seeks advance ruling on classification and rate of tax on supply of parts & accessories that are suitable for use solely with the hearing aids.
5. Applicant’s Interpretation of Law:
5.1 The applicant wishes to draw the attention to Explanation (iv) to Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 which provides that “the rules for the interpretation of the First Schedule of the Customs Tariff Act, 1975 ( 51 of 1975, including 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.” Insertion of this Explanation inevitably means that interpretation of First Schedule of Customs Tariff along with its Section that Chapter Notes are borrowed for interpretation and classification of Goods under GST Law.
5.2 Hearing aids and parts and accessories of hearing aids find place in Chapter 90 to the Customs Tariff Act. As already stated above, hearing aids supplied by the Applicant are classifiable under HSN 90214090. For classification of parts and accessories suitable for use solely with the hearing aids, we are placing reliance on Note 2 to Chapter 90, which enunciates test to classify parts and accessories. The bare extract of the said Note is reproduced below:-
“2. Subject to Note 1 above, parts and accessories for machines, apparatus, instruments or articles of this Chapter are to be classified according to the following rules:
(a) parts and accessories which are goods included in any of the headings of this Chapter or of Chapter 84, 85 or 91 ( other than heading 8487, 8548 or 9033) are in all cases to be classified in their respective headings;
(b) other parts and accessories, if suitable for use solely or principally with a particular kind of machine, instrument 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;
(c) all other parts and accessories are to be classified in heading 9033.”
5.3 Note 2 to Chapter 90 in clear terms states that parts and accessories are to be classified in the following manner:-
a. If parts and accessories are mentioned in any heading, then it has to be classified in that specific heading (Note 2(a));
b. If parts and accessories are not mentioned in any heading, then:-
i. If suitable for sole or principal use with a machine or devise, then classify with the machine or device (Note 2 (b));
ii. Otherwise, classify under heading 9033 (Note 2(c));
5.4 As the parts and accessories supplied by the applicant is suitable for use solely with hearing aids, taking shelter under Note 2(b) to Chapter 90, the said parts and accessories are also to be classified under Chapter heading 9021 along with hearing aids. Hence, the tax treatment ( in terms of classification, rate of tax and exemption, if any) of hearing aids will be applicable to its parts and accessories as well. Having established that parts and accessories are classified as hearings aids under Chapter heading 9021 (4-digit HSN level in Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and Notification 2/2017-Central Tax (Rate) dated 28.06.2017 , The next question that needs answer is the classification at 8-digit HSN level.
5.5 Reference is made to Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and Notification 2/2017-Central Tax (Rate) dated 28.06.2017 ; SI. No. 221 of Schedule II ( 12% rate of tax) to 1/2017-CTR excludes hearing aids and SI. No. 142 of Notification 2/2017-Central Tax (Rate) dated 28.06.2017 (exemption entry) exempts hearing aids. Both the entries in respective notifications are at 4-digit HSN level and not at 8-digit HSN level. Therefore, we draw reference to the text of chapter heading 9021 of Customs Tariff for understanding 8-digit HSN level classification of parts and accessories. In this regard, Chapter heading 9021 and two specific tariff entries therein which are relevant are reproduced below:-
“HSN 9021: ORTHOPAEDIC APPLIANCES, INCLUDING CRUTCHES, SURGICAL BELTS AND TRUSSES; SPLINTS AND OTHER FRACTURE APPLIANCES; ARTIFICIAL PARTS OF THE BODY; HEARING AIDS AND OTHER APPLIANCES WHICH ARE WORN OR CARRIED, OR IMPLANTED IN THE BODY, TO COMPENSATE FOR A DEFECT OR DISABILITY:
HSN 902140-Hearing aids, excluding parts and accessories:
HSN 90214010: Frequency modulated hearing aid system used for hearing by handicapped persons in group situation
HSN 90214090: Other
HSN 902190-Other:
HSN 90219010: Parts and accessories of hearing aids
HSN 90219090: Other”
5.6 As can be seen above, parts and accessories of hearing aids are not mentioned in the text of the Chapter heading 9021. Since the parts and accessories supplied by the Applicant are suitable for use solely with the hearing aids, in terms of Note 2 (b) to Chapter 90, the said parts and accessories are to be classified along with the hearing aids in Chapter heading 9021. Further, the Applicant believes that reference to hearing aid in the text of Chapter heading 9021 includes reference to the parts and accessories suitable for use solely with hearing aids.
5.7 As discussed above, hearing aids mentioned in text of Chapter heading includes its parts and accessories. Hence, to create two separate tariff entry under Chapter heading 9021, parts and accessories are specifically excluded in tariff entry 902140 and listed in separate tariff entry 90219010. So, the Applicant believes that it is safe to conclude that wherever reference to hearing aids is made ( under Customs Tariff and GST notifications) it always includes its parts and accessories unless such parts and accessories is specifically excluded from hearing aids like in case of tariff entry 9021 40 above.
5.8 Based on the above discussion, the Applicant believes that the tax treatment (rate of tax) of parts and accessories suitable for use solely with hearing aids is dependent on tax treatment of hearing aids. Accordingly, it is relevant to understand the tax treatment of hearing aids under the GST Law. The relevant entries in various notifications where the tax treatment of hearing aids is specified are as under:
