In re INVENTAA LED Lights Private Limited (GST AAR Tamilnadu)
What is the applicable GST Tariff code and GST rate for the supply of patent-applied LED stem (long bulb) with fittings when both are manufactured in the applicant’s factory and supplied as a single unit?
Supply of ‘LED stem (long bulb) i:e. outdoor lighting fixtures with LED integrated inside them, by the applicant is classifiable under CTH 94054090 and is taxable at the rate of 6% CGST vide Sl.No. 226 of Schedule-ll of Notification no 01/2017-C.T. (Rate) dated 28.06.2017 as amended and 6% SGST as per S. No. 226 of Schedule-ll of G O. (M.S.) No. 62 dated 29.06.2017 as amended.
2. Is it a composite supply or a mixed supply?
FULL TEXT OF 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.
M/s. lnventaa LED Lights Private Limited No.7A, Leo Industrial Estate, 2nd Floor, Pallikaranai, Chennai 600 100. (hereinafter called the Applicant) is engaged in manufacturing and trading of high-quality Outdoor and Indoor LED Lights with Fittings. They are registered under GST with GSTIN 33AAECI1643Q1ZD. The applicant has sought Advance Ruling on:
What is the applicable GST Tariff code and GST rate for the supply of patent-applied LED stem (long bulb) with fittings when both are manufactured in the applicant’s factory and supplied as a single unit? Is it a composite supply or a mixed supply?
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 201 7 and SGST Rules 2017.
2.1 The applicant is engaged in the design, manufacture and supply of LED Lights of various applications in wide range of sizes and voltage with Fixtures and fittings where the fixtures and Fittings are made up of Plastic, Aluminium, Steel or a combination thereof. The applicant has stated that they have developed a LED Stem (Long bulb) which has a 360-degree light output and at the same time saves power up to 60% in comparison to the CFL bulb, whereas the conventional LED bulb delivers only 180-degree light output. It can be Fitted into a B22 or E27 holder. 70% of the raw materials are manufactured indigenously and 30% are imported from China and the manufacturing is done in-house. The applicant has named the product as LED stem (long bulb) and has applied for the patent of the technology involving manufacturing of LED stem (long bulb) which has the feature of 360-degree light output.
2.2 The LED stem (long bulb) consists of various electronic components, a High graded UV protected polycarbonate body and a base. They are intended to be fitted into a lighting fixture and serve for area lighting and the components of the LED bulb manufactured by the applicant is as below :
a. LED array developed in-house R&D for high Light output.
b. Special Flexible MCPCB (Metal Core Printed Circuit Board) designed specifically for this product.
c. PCB (Plastic Circuit Board) mounted in house with Driver components
d. Aluminum Heat Sink & Plastic Housings designed for longer life having high strength and better heat conductivity.
The applicant has stated to have launched a new product wherein the LED stem (long bulb) is sold along with the fixtures and fittings to save the customers from the hassle of buying the products separately. The fixtures and fittings are also manufactured in-house and the applicant has close to 2500 designs of fittings. Depending upon the usage of the lights, the fittings are designed. The indoor lights are ideal for shops, offices, showrooms, hotels, living room etc., and the outdoor lights are ideal for Garden Pathways, Gate lights, Street Lights, Flood Lights etc. Their products range from Garden Lights from 7 inches to 16 inches, Bollards from lft to 3ft. The fittings are made of Polycarbonate, Stainless Steel or Aluminum. The fittings can be installed only with the LED stem (long bulb) of 12 watt or 18 watt manufactured by the applicant. The supply of this new product is being done through a network of dealers in South India and also through a retail showroom in Chennai.
2.3 The applicant on the interpretation of law has stated that the product in question i.e. Light Fittings with LED Stem (Long Bulb) is to be classified under Chapter 94 of the First Schedule to the Customs Tariff Act, 1975 – “Furniture; Bedding, Mattresses, Mattress Supports, Cushions And Similar stuffed furnishings: Lamps and Lighting Fitting,. Not Elsewhere specified or Included; Illuminated Signs, Illuminated Name-Plates and the like; Prefabricated Buildings”. They have stated that the description reads as “Lamps and lighting fittings including searchlights and spotlights and parts thereof, not elsewhere specified or included”.; For a Lamp or lighting fittings to be classifiable under Chapter 94, it must not be specified or included elsewhere meaning that that the lamp or lighting fittings must not be covered by any other heading of any other Chapter which is consistent with Note 1(f) to Chapter 94 that excludes “lamps and lighting fittings of Chapter 85;” from its scope.; that the only plausible tariff item is 8539 of Chapter 85 – “Electrical Machinery And Equipment And Parts Thereof; Sound Recorders And Reproducers, Television Image And Sound Recorders And Reproducers, And Parts And Accessories Of Such Articles” of the First Schedule to the Customs Tariff Act, 1975.; that it is clear from the wordings of CTH 8539, that the same refers specifically and exclusively “electric filament or discharge lamps, including sealed beam lamp units and ultraviolet or infra-red lamps; arc lamps; Light emitting diode (LED) Lamps”.’, that heading applies only to lamps which use a particular technique in order to produce light. The applicant has further stated that the scope of the above entry’ becomes clearer when read in conjunction with the Chapter Heading. When so read, it becomes clear that their product falls under Heading 9405.; that Chapter 85 intends to include lamps which are used in conjunction with other electrical equipment and which are generally not used independently but designed to play a particular role as components in electrical equipment. Example: capacitors, switches, fuses, junction boxes, transistors, valves and tubes etc.; Light Emitting Diode (LED) is the basic semi-conductor device that emits light when an electric current pass through it and When the same is installed in a lighting fixture with other electrical components and connected to a power source, it emits light and becomes a LED lamp. The word Lamp in Chapter 8539 was used to include bulbs -the diode along with electrical components like glass covering, drivers, MCPCB and a screw with wires for connecting to a power source. These are intended to be installed in a luminaire or a general lighting system. The luminaires are the final lighting fittings. They would be assembling the LED stem (long bulb) with different types of fittings to suit the end use of its buyers and selling it as a complete unit so that the buyers can use the lights for illuminating the area by just connecting it to an electric power source. These lights are usually permanently fixed to a light source. The complete LED lighting fittings also serve aesthetical demands of the end users.
2.4 The applicant has further stated that the Rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 has been made applicable to the interpretation of Notification No. 1/2017- Central Tax (Rate) dated 28.06.2017 vide Explanation (iv) to the said Notification. As per Rule 1 of the Rules of Interpretation, “The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisios ” If the product is classified based on the specific heading read with Section and Chapter Notes, then the classification of the product has to be done under the said heading only; in the instant case being Chapter Heading 9405. Also, as per Rule 3(c) of the Rules of Interpretation, when goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. The applicant has stated that they intend to supply the “LED stem (long bulb) installed lighting fittings” developed by them. As this makes it as a LED lighting product, the applicant is of the view that it will merit classification under the Tariff heading 9405 attracting 12% GST as Chapter 94 is reserved for finished lights with fixtures; while LED stem (long bulb) alone will merit classification under Chapter 85 which deals with Electrical Components like the LED stem (long bulb) in conjunction with electrical machinery and parts thereof. Since they are going to sell the complete unit including fixture and light, they are of the view that it will be regarded as a single product having a separate identity and hence cannot be dragged in to the concept of composite supply or mixed supply and the same will be classifiable under the Chapter Heading 9405 which is taxable at 12% (CGST + SGST) or 1GST.
3.1 The applicant was offered an opportunity to be heard in person on 23.07.2019. They appeared and submitted a copy of the patent application for their LED long bulb. They submitted a brochure for their products. They stated that their products are LED Bulbs/Lamps with fittings/casing made of aluminum and plastic which are used as gate lights, ceiling lights, etc. They stated that the bulb is of their own invention with 360 degree as against to the existing 180 degree lights. They stated that the LED bulb cannot be replaced in their products as the bulbs are not available /sold separately. They supply the full lamp with fitting with two year warranty. They submitted sale invoices with sales starting from February 2019. They stated that before this, they were manufacturing lamp fittings, housings, etc. They stated that they will submit the invoices, central excise returns, brochures pertaining to previous supply in two weeks. They requested for another hearing.
3.2 The applicant furnished additional submissions enclosing Brochure of Category’ A products, Category A- GST invoice, Category C- Excise Invoice of Inventaa Mouldings; Category C- GST Invoice of Inventaa LED Lights, Old Brochures and Central Excise Returns. In the written submissions, they had stated that:
> their company (earlier known as Inventaa LED Innovation Private Limited) was started in the year 2016; they have been into the similar line of business since 2006 by name of Inventaa Mouldings; that Since 2006, they were manufacturing Garden Light enclosures with the use of Polycarbonate and Stainless steel ; that during that time, CFL Bulbs were in use so the customers could purchase the bulb separately from the market and fit into their enclosures and use as Garden Lights. Later in the Year 2015-16, the availability of CFL bulbs reduced in the market due to environmental regulations imposed by Government; that sale of Garden Light enclosures had reduced drastically and to overcome this issue, they started fitting PCB based LED inside the garden lights and due to the reasons like Non-360 Degree Lighting, Failure due to Water, Insects, Less Light output they were not able to fully satisfy the customer requirements.
> the aim of starting a new company was to launch a new LED light with Fixtures and fittings which could overcome the problems of a conventional LED light which was able to produce only Lesser Light output (only 180-degree) and they have now invented a new LED stem (Long bulb) and after testing it for 6 months has applied for the patent of this product.
> To suit the requirements of this invention, they have launched a full range of new garden lights and set up the full manufacturing facility and also invested in own moulds and dies for the manufacture of the LED lights with fixtures or fittings; that they intend to supply the full product to the consumers i.e. the New LED Stem (long bulb) along with its enclosures. As the full product is factory fitted, tested and certified, the consumers are saved from the hassle of buying the low-quality LED lights and fixtures separately.
> They are dealing with the below type of products:
A. LED Stem (Long bulb) used in the following products:
I. LED Garden Lights:
