Anomaly in Rates of GST on Spare-parts and Accessories of Agriculture and Harvesting Machineries

Anomaly in  Rates of GST on Spare-parts and Accessories of Agriculture & Harvesting Machineries

At 15th GST Council Meeting held on 3rd June, 2017, it was decided in principle to place Agriculture and Harvesting Machinery in the tax bracket of 12%. It was explicit from the communicated details pertaining to the decision of the Hon’ble Members of the Council that, apparent legislative intent was to levy GST @ 12% on all Machineries and parts thereof used for Agriculture and Harvesting purposes.

In premise of decision taken in Council meeting to levy GST on Agriculture and Harvesting Machineries and parts thereof (with respect to their classification in HSN) @ 12%, the primary items of contemplated class covered respectively under the ambit of HSN Chapter sub-headings 8432, 8433 & 8436 were rightly put into the tax bracket of 12%. But mistakenly a few essential key parts of Agriculture and Harvesting Machineries more specifically classified in HSN Chapter sub-headings other than the principal headings 8432, 8433 & 8436, escaped eyes of legislature and consequently noticed themselves out of the scheme of levy intended for Agriculture and Harvesting Machineries. For instance, Blades, Gear Boxes, Pulleys etc, for Agriculture and Harvesting machineries when brought as spare-parts by a manufacturer of such Machines are more specifically and rightly place under HSN Chapter sub-headings 8208 & 8483 and thereby against the intent of the Council exposed to GST @ 18% & 28% respectively. This levy at the rate higher than decided rate of 12% is evidently unintentional and rather accidental. This levy of GST on the parts of Agriculture and Harvesting Machineries @ 18% & 28% respectively is evidently a pure legislative error that warrants to be rectified timely.

The issue causing discomfort to medium and small scale industries engaged in manufacture of Agriculture and Harvesting Machineries and parts thereof and also those SSI units supplementing them with the stipulated spare-parts, may be summarized as under:

(i)     HSN Chapter sub-headings 8208 more specifically covers the Blades used in Agriculture and Harvesting Machineries as compared to the Chapter sub-headings 8432, 8433 & 8436. The items covered under this sub-heading 8208 are exposed GST @ 18%; and

(ii)    Similarly HSN Chapter sub-headings 8483 as compared to HSN Chapter sub-headings 8432 & 8433, more specifically covers Gear Box, Pulley etc used as parts, assembly or sub-assembly of any machinery system. These HSN items are invariably used in almost all Plant & Machinery system including the Machinery meant for Agriculture and Harvesting purposes. But failing to take cognizance of the fact that, parts/spare-parts specifically covered by HSN Chapter sub-headings 8483 are also the key assemblies of Agriculture and Harvesting Machineries, the Chapter sub-heading is collectively and conjointly placed in the tax bracket of 28% without providing any relief whatsoever to the usage of such items for Agriculture and Harvesting Machineries. Consequently when these items are brought into the factory of manufacture of Agriculture and Harvesting Machineries for being fitted into the said machineries, would be inadvertently exposed to the accidental levy of 28% which is against the spirit of the decision taken in the stipulated Council meeting.

(iii)   The items as aforementioned {i.e. Blades, Gear Boxes, Pulleys etc.,}, despite of the facts being used in Agriculture and Harvesting Machineries would be exposed to Tax @ 18 % & 28% respectively as specified against the respective sub-headings under HSN, which would be in evident contradiction of the manifest intend of the legislature and the very specific decision taken by the Council in the stipulated meeting on 3rd June 2017.

There is no denying that intended levy on Agriculture and Harvesting Machineries and parts thereof is @ 12%. But in oversight and slip of the fact that vital parts as aforementioned of Agriculture and Harvesting Machineries more specifically classifiable under sub-headings other than principal sub-headings of Agriculture and Harvesting Machineries i.e. 8432, & 8433, would be subjected to inadvertent, unintended and undersigned levy more than the intended rate of 12%.

The trade anticipate delivery of justice from the most efficient, trustworthy, thoughtful and equitable Government of the people, by the people and for the people of India. The unorganized trade of very small sector engaged in the manufacture of machineries for agriculture purposes is eying at the Ministry of Finance, Department of Revenue hoping that they will proceed to issue an Exemption Notification removing the anomaly and harmonizing the rate of tax on the parts/spare-parts independently classifiable under sub-headings 8208 and 8483 with that of the Agriculture and Harvesting Machineries of Tariff Headings 8432, 8433 & 8436 wherein such items are finally put to use. An unambiguous exemption notification to this effect would only provide most rightful relief to the industries engaged in the manufacture of Parts, Spare-parts, Accessories etc., for Agriculture and Harvesting Machineries.

Hon’ble Finance Minister, for the sake of faith of the small trade in the righteous approach of the most efficient and trusted Cabinet since independence, a timely action is the only answer to this concern of the industry engaged in the manufacture of Agriculture and Harvesting Machineries and their parts, in view of the fact thatstipulated inconsistency is virtually a sequel of an apparent legislative error.