In re Bharat Dynamics Limited (GST AAR Andhra Pradesh)
Whether the Submarine Fired Decoy System (SFDS) supplied by the applicant is classifiable as ‘parts of submarine’ under Chapter Heading 8906 and, therefore, attract a GST rate of five (5%) by virtue of entry no. 252 of Schedule I in Notification No. 1/2017-Integrated Tax (Rate) dated 28.07.2017 ?
The issue at hand is to examine whether the Submarine Fired Decoy System (SFDS) proposed to be supplied by the applicant is classifiable as ‘parts of submarine under Chapter Heading 8906 and, therefore, attract a GST rate of 5% by virtue of entry no.252 of Schedule I in Notification No. 1/2017-Integrated Tax (Rate) dated 28.07.2017 or not.
The proposed supply of goods by the applicant, i.e., Submarine Fired Decoy System (SFDS) is an anti-torpedo defence system. Now we examine the applicant’s claim that the SFDS, being an essential and requisite component of the warship falls under chapter heading 8906.
Heading 8906 constitutes all kinds of structures that make any floating vessel but not of a particular kind. All the assembled, unassembled, or disassembled structures which are integral and essential to the making of a vessel fall in this category.
In addition to the above, the description of goods under 51.No. 252 is “Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907.” In the instant case the product supplied by the applicant i.e., SFDS is basically not part of goods falling under headings 8901, 8902, 8904, 8905,8906, 8907 as claimed by him. It is neither integral nor essential to the ‘basic structure and intended general functioning of the submarine’, Besides, this anti-torpedo decoy system detects and locates the incoming torpedo with the help of SONAR & deploys decoys to confuse incoming torpedo attack It is an anti-torpedo counter measure system for submarines and not an indispensable part of the submarine. Thus, it is not a part of ‘ships boats and floating structures’ but an additional feature that falls under the category of ‘arms and ammunition’. As there is no description or explanation of ‘arms and ammunition’ anywhere in the GST Act, we refer to the general usage of the word in trade parlance.
In the present instance, SFDS is a part of military supplies and an anti-weaponry defence system used in naval warfare. This anti-torpedo system launches or drops expendable decoys from the launching pad.
The decoys dropped from launcher assembly of SFDS are also expendable, light weight high performance decoys. These decoys generate low frequency signals identical to warship engine, which confuses torpedo about actual location of warship. They simulate false target echoes seducing the torpedo acoustic system.
Moreover, these decoys are the component parts of the SFDS system that create the effect on a target torpedo.
Thus, we are of the opinion that the SFDS system can very well be categorised under the heading of ‘arms and ammunition‘. Moreover, in terms of classification rules, the goods need to be classified with goods of similar nature or they are akin to. Accordingly, goods are classified under chapter 93.
The relevant entry is Chapter 93 under Section XIX of I Schedule to Custom Tariff Act, 1952, which deals with ‘Arms and ammunition; parts and accessories thereof’. It falls under the HSN code of 9306 ‘ Bombs, grenades, torpedoes, mines, missiles and similar munitions of war and parts thereof; cartridges and other ammunition and projectiles and parts thereof, including shot and cartridge wards.
Read AAAR Order : SFDS is classifiable as ‘parts of Submarine’ & falls under Chapter 8906
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, ANDHRA PRADESH
1. At the outset we would like to make it clear that the provisions of CGST Act, 2017 and SGST Act, 2017 are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the APGST Act.
2. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and AP Goods & Services Tax Act, 2017 (hereinafter referred to CGST Act and APGST Act respectively) by M/s. Bharat Dynamics Limited (hereinafter referred to as applicant), registered under the AP Goods & Services Tax Act, 2017.
3. Brief Facts of the case:
