In re Dollar Industries Limited (GST AAAR West Benagal)
The West Bengal Authority for Appellate Advance Ruling (AAAR) upheld a previous ruling classifying PVC raincoats as plastic items under HSN Code 3926, attracting an 18% Goods and Services Tax (GST). This decision was in response to an appeal filed by M/s Dollar Industries Limited, a manufacturer of PVC raincoats. The company sought clarification on whether its raincoats should be classified as textile (HSN 6201) or plastic (HSN 3926) and the applicable GST rate, particularly if priced under ₹1,000, which would typically attract a 5% rate for certain textile items. The original Advance Ruling Authority had determined that the raincoats, being made of PVC and manufactured through a fusion method (non-woven), could not be considered textile fabric.
Dollar Industries Limited argued that PVC raincoats, despite their synthetic nature, should be classified under HSN 6201 4010, aligning with their function as apparel and supported by judicial interpretations and common commercial practices. They cited Supreme Court judgments emphasizing that “textiles” can encompass woven fabrics regardless of material, and that HSN Explanatory Notes for Chapter 62 specifically include raincoats. However, the Revenue countered that PVC is a synthetic polymer, not a natural textile, and therefore, PVC raincoats properly belong under the plastic chapter heading. The AAAR, after reviewing the arguments and HSN Explanatory Notes for both Chapter 39 (Plastics) and Chapter 62 (Articles of apparel), found that these chapters are mutually exclusive. It concluded that PVC is a plastic, and raincoats made by sealing plastic sheets fall explicitly under HSN 3926, which specifically lists “raincoats” as articles of plastics. This decision reinforces that the material and manufacturing process, in this instance, dictate the classification over the end-use or common parlance for this specific product.
