Car seat cover an accessory, to attract GST at 28%, rules Andhra Pradesh AAR

Shishir Sinha New Delhi, August 13 New Delhi | Updated on August 13, 2021

Seat covers are not essential parts of the seats but accessories that enhance their functional value, it says

The Andhra Pradesh Authority for Advance Ruling (AAR) ruled that car seat covers are an accesory and therefore, will attract GST at the rate of 28 per cent.

Anantpur (Andhra Pradesh)-based Saddles International Automotive & Aviation Interiors sells manufactured ‘seat covers’ to car seat-makers who, in turn, affix these covers to the seat. Thereafter, the seat is fixed to motor vehicles. The company submitted that it was collecting GST at the rate of 28 per cent on the basis of rate notification made public on June 28, 2017.

However, the Central Board of Indirect Taxes and Customs (CBIC) came out with a new notification on November 14, 2017, a new entry serial number 435A — related to Seats (excluding various kind of chairs and parts placed under heading 9402), whether or not convertible into beds, and parts thereof (other than seats of a kind used for aircraft) — and said it will attract a rate of 18 per cent. The company wanted to know whether this is the correct classification so that benefit of reduction can be given.

It submitted that ‘seat covers’ should be judged on the basis of the functions they perform – the covers enable the seats to give a comfortable position to drivers and passengers. They are equipped with cushion and give stability to the ‘seats’. Further it was submitted that ‘seats’ per se would be incomplete without the ‘seat covers’ in question in as much as it forms an integral part of the ‘seats’ and hence, merit classification under HSN 9401. It stated that ‘seats’ are not to be judged only on the basis of their affixing to a motor vehicle. It has to be seen as a whole and a ‘seat’ would be complete only when the products in question are affixed to a ‘seat’.

The hearing

At the hearing, the AAR took note of the dictionary meaning of ‘part’ and ‘accessory’. The Cambridge dictionary says ‘part’ is ‘a separate piece of something, or a piece that combines with other pieces to form the whole of something or one of the pieces that together form a machine or some type of equipment. This means ‘parts’ combine to form a whole and they are integral to the completion of any article or equipment.

As per the Merriam-Webster, the definition of ‘accessory’ is ‘an object or device that is not essential in itself but adds to the beauty, convenience, or effectiveness of something else’. Example given: auto accessories and clothing accessories.

“After a clear examination of both the above terms i.e., parts, and accessories, ‘seat covers’ cannot be a part of seats by any means in the instance case. They are meant for the protection of the seats and the functional value of ‘seat covers’ is the comfort and convenience it extends to the driver and the passengers. Thus, the ‘seat covers’ are not essential parts of the seats but accessories that enhance their functional value,” the AAR ruled while noting that seat covers are customised based on the customer’s preference.

Published on August 13, 2021

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