GST UPDATE ON FILING OF ADVANCE RULING FOR CLASSIFICATION OF NON-EXISTENT GOODS:- 142/2020-21

The concept of advance ruling was introduced in the GST regime so as to take guidance as regards liability of tax, classification, applicability of notification, admissibility of input tax credit etc. on various goods or services. As per section 95(a), advance ruling may be obtained in relation to supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Recently, the AAR Maharashtra in the case of M/s Saint Gobain India Private Limited has held that as the goods for which classification has been sought are not in existence, the AAR is unable to comment on the classification of the said product. The decision of this advance ruling and its repercussions are the subject matter of the present update. The applicant is engaged in manufacturing and trading of glass and gyproc products and is proposing to manufacture glass-fibre reinforced gypsum board. The present application for advance ruling has been filed for ascertaining the classification of the product proposed to be manufactured by the applicant and applicability of concessional benefit stated under Schedule II of notification no. 1/2017-Central Tax. Various submissions were made for granting the benefit of concessional rate of GST for the proposed product manufactured by the applicant. Reliance was placed on various case laws for contending that specific description should prevail over general description and that when two interpretations are possible, the interpretation beneficial to the assessee should be adopted. Hence, their product should be classifiable under entry ?Glass-fibre reinforced gypsum board? which attracts 12% rate of tax as it is more beneficial to the applicant than the entry ?faced or reinforced with paper or paperboard only? which attracts 18% rate of tax. However, the jurisdictional officer contended that since the proposed product is not yet manufactured, hence in the absence of any sample of the said product being tested from accredited laboratory to determine the exact nature of the product, its classification cannot be arrived. The AAR accepted the submissions of the jurisdictional officer and concluded that section 95(a) states that advance ruling can be sought for supply in relation to goods or services being undertaken or proposed to be undertaken but in the present case, the proposed goods are to be manufactured so it is not possible to determine the classification without observing the sample of the proposed product. Hence, the application was rejected as non-maintainable and was rejected. The above conclusion arrived by the Hon?ble AAR is absurd as in our opinion, the term ?supply? will definitely include manufactured goods and merely because the proposed goods are not being presented in the form of sample, the determination of classification and applicability of concessional notification cannot be denied. The applicant in the present case had provided all the technical specifications of the proposed product and on that basis, conclusion as regards classification of the product should have been determined by AAR. In cases where turnkey projects are being proposed, it may not be possible for the applicant to first manufacture its sample and then seek clarification as regards its classification or rate of GST. In our opinion, the above decision is likely to be challenged before the appellate authority for advance ruling for re-consideration.

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GST UPDATE ON FILING OF ADVANCE RULING FOR CLASSIFICATION OF NON-EXISTENT GOODS:- 142/2020-21

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