In re Jotun India Private Limited (GST AAR Maharashtra)
Issue-
Whether marine paints supplied by the applicant, would be considered to be a part of ship and accordingly be then classified under SI No. 252 of Schedule I of Notification No. 1/2017 of Central Tax (Rates) dated June, 28, 2017?
Held
The very same question with which we are here confronted came up for decision before the High Court of Mysore in State of Mysore v. Kores (India) Ltd (26STC 87). (1) where it was held:
“Whether a typewriter ribbon is a part of a typewriter is to be considered in the light of what is meant by a typewriter in the commercial sense. Typewriters are being sold in the market without the typewriter ribbons and therefore typewriter ribbon is not an essential part of a typewriter so as to attract tax as per entry 18 of the Second Schedule to the Mysore Sales Tax Act, 1957.”
Considering the meaning of an expression (Part) as defined in the dictionary and adopted by the courts mentioned above besides common parlance test it can be safely concluded that Marine Paint is not a component part of Ship. This conclusion which we have drawn as above gets support from the facts stated by the appellant and detailed discussions above as per which marine paints are clearly consumable items and not parts.
Thus we would be stretching the definition of ‘part’ greatly, if we intend to treat paints as parts of ship in view of the above discussions
Further, the applicant, citing Section 30(2) of the VAT Act of the United Kingdom and Group of Schedule 8 of the said VAT Act and VAT Notice 744 C of the U.K., has submitted that under the said Act paints, solvent and thinners have been considered to be parts and equipment of a ship. However we find that the statutory provisions, conditions for benefit as given and referred by the applicant in UK VAT Act are in different context and therefore not relevant in the facts of the case in present matter.
As per above detailed discussions we do not find any merit in the argument advanced by the applicant that Marine Paint should be considered as a part of Ship and accordingly find that marine paints are not covered under Serial No.252 of Schedule 1 of Notification No.1/2017 of Central Tax(Rates) Dated June 28,2017.
Also Read AAAR Ruling – Marine paints cannot be considered as Part of Ship: AAAR Maharashtra
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MAHARASHTRA
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by JOTUN INDIA PRIVATE LIMITED, the applicant, seeking an advance ruling in respect of the following issues.
1. Whether marine paints supplied by the applicant, would be considered to be part of ship and accordingly be then classified under SI no 252 of Schedule l of Notification No 1/2017 of Central Tax (Rates) dated June 28, 2017?
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the “GST Act”.
02. FACTS AND CONTENTION – AS PER THE APPLICANT
The submission (Brief facts of the case), as reproduced verbatim, could be seen thus –
“jotun Croup is a leading supplier of paints and powder coatings. The Applicant, Jotun India Private Limited is a supplier, exporter and manufacturer of paints and powder coatings. The Applicant supplies paints and coatings that are specially designed for unique conditions.
Broadly, the paints supplied by the applicant can be categorized in Solvent based paints and Water based paints. One of the major supplies by Applicant are marine paints. Composition of such marine paint being manufactured by Applicant makes it suitable for ships during building stage and even during maintenance. Details of such products along with its description are enclosed as Annexure 4
In the erstwhile Indirect Tax regime, Applicant has been discharging applicable Indirect taxes on supply of such paints and availing exemptions when granted under respective legislation. Since July 2017, new Indirect Tax regime – Goods and Service Tax (GST) has been introduced in India by way of introduction of following legislation:
o Central Goods and Service Tax Act, 2017 (CGST)
o State wise Goods and Service Tax Legislation (SGST)
o Integrated Goods and Service Tax Act, 2017 (IGST)
With the introduction of GST, Applicant has analysed classification and applicability of CGST, SGST and IGST in light of new legislation. For classification, it has been clarified in the rate notification of respective legislation that rule for interpretation of the First Schedule to the Customs Tariff Act, 1975 including Section notes and Chapter notes and general explanatory notes of the said First Schedule would be applicable for the purpose of classification under GST.
Accordingly, Applicant has sought to classify paints being supplied under HSN 3208 and 3209 on the basis of nature of the product and after considering relevant chapter notes and section notes. Notification No 1/2017 – Integrated Tax (Rate) dated June, 28, 2017 prescribes applicable rate of IGST (hereinafter referred to as IGST Rate Notification). Paint supplied by Applicant are classifiable under Chapter Heading 3208 and 3209 are covered under Schedule IV of the said Notification and accordingly liable to 28% IGST.
However, under same IGST Rate Notification, Schedule I liable to 5% IGST covers parts (classifiable under any chapter) of goods falling under heading 8907 i.e. part of ships. Since, marine paints supplied by Applicant are suitable for use by ships, Applicant wishes to understand whether the said marine paints could get classifiable under Schedule I.
Accordingly, Applicant is making detailed submission herein below to demonstrate eligibility of marine paint to be classified under Schedule I and requests a ruling be pronounced in this regard.
A. Marine paints to qualify as part of Ship in order to set covered under Schedule I of IGST Rate Notification liable to 5%
Al. In order to deliberate on the question being sought, it is pertinent to analyse the classification of marine paints supplied by Applicant in detail. Technical features of marine paints are relevant for such analysis.
A2. Accordingly, Applicant submits that marine paint is a specific type of paints suitable for use principally for ships during building stage and even during maintenance. The sailing ship needs protection from corrosive environment in which they operate. Such marine corrosion has a significant impact on sea carriers and their longevity. Therefore, effective corrosion control strategies are chosen considering appropriate selection of coaling for a marine environment. Marine coatings have special functionality to protect marine vessels and other carriers above and below the waterline. Accordingly, marine paints supplied by Applicant has following technical features:
