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Retrofitted two wheelers for use of differently abled persons to be taxed as normal vehicle under HSN 87112019 @ 28% GST with ITC : Says AAR, Karnataka

(Image for representation purpose only)

Facts of Case

The applicant purchases two wheelers from M/s Hero Motocorp Ltd., under HSN 87112019 which is liable to GST at 28%. He also purchases retro fitment fitting, under HSN 87131090 at GST 5%. This retro fitment fitting is fixed to the vehicles purchased and sold to the differently abled customers.

The applicant states that he is presently collecting GST from the customers of Retrofitted vehicles at two rates - Vehicles at 28% and Retro Fitment Fitting at 5%.

The applicant states that other dealers in the market are selling such vehicles i.e. after fitting retrofitment at GST 5% on the entire sale value including vehicles under HSN 87131090. Hence some of his differently abled customers were demanding him to charge GST on entire sale value of the vehicles (after retrofitment) at 5% under HSN 87131090. Hence, the applicant has sought to know whether he can bill the entire value of the vehicle after retrofitment, purchased by differently abled customers at 5% under HSN 87131090.

The applicant states that if he is allowed to sell the vehicles at 5%, whether he can claim ITC on the entire 28% paid for purchase of vehicles even though on sale he will be allowed to charge 5% on the output.

Arguments by Applicant

The applicant states that the goods sold by him i.e. retrofitted two wheelers are to be classified under serial number 243 under HSN 8713 - Carriage for disabled persons, whether or not motorized or otherwise mechanically propelled and is liable to tax at 5%. He states that the Cars for physically handicapped persons under HSN 8703 are given special treatment subject to conditions and the two wheelers require more facility for specially abled compared to Motor Car.

Held by AAR

In the instant case, it is an admitted fact that the applicant purchases a vehicle i.e. two-wheeler and also certain additional parts/accessories to retrofit the said vehicle with the said parts/accessories. The word ‘Retrofit’ as a noun is an act of adding a component or accessory to something that did not have it when manufactured. Therefore, the applicant is adding certain components to the two wheeler by retrofitting the same i.e. an attachment is added to the said two wheeler (motor cycles) to enable it to be driven by the disabled person. This does not change the basic feature of the two wheeler. In the instant case the two-wheeler was neither specially designed or constructed nor altered to change its basic structure, after retrofitment.

Explanatory Notes to the Harmonized Commodity Description and Coding System specifies that the heading 8713 excludes Normal vehicles simply adapted for use by disabled persons or a bicycle fitted with a special attachment and pedalled with one foot and Trolley-stretchers. In the instant case the two-wheeler is simply retrofitted with additional components / accessories to enable it for use by disabled persons. Therefore, the impugned retrofitted two-wheeler gets excluded from the heading 8713.

In view of the above, the retro fitted two-wheeler is nothing but a two-wheeler purchased by the applicant under heading 8711 20 19, added with additional components/accessories and hence does not change its basic structure. Therefore, the said retro fitted two-wheeler merits classification under heading 8711 20 19 only.

The retrofitted vehicle merits classification under heading 8711 20 19 and hence attracts GST @ 28% and applicant is entitled for input tax credit of tax paid on purchase of vehicle i.e. scooter.


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Published by

TaxReply

on May 30, 2020


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