Advance Ruling – ‘Rakhi’ to be classified as per its constituent materials – AAR, West Bengal

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  • Where the applicant is manufacturing ‘Rakhi’ by employing different threads of Zari, Nylon or Cotton Glass Beads, Plastic Beads, Coloured Stones, Metal Pendants and Rudraksha, whether he can claim exemption as per entry number 148 of Notification No. 2/2017 – CGST (Rate) dated 28.06.2017 by covering ‘Rakhi’ under ‘Kalava (Raksha Sutra)’ as part of the chapter ‘Puja Samagri’;
  • Also, the applicant questions for taxability of ‘Rakhi’ under Serial No 224 of Schedule I – ‘the Other made up textile articles, sets, worn clothing and worn textile articles and rags of sale value not exceeding Rs. 1000 per piece’ chargeable @ 5% and Serial No 171 of Schedule II – ‘the Other made up textile articles, sets, worn clothing and worn textile articles and rags of sale value not exceeding Rs. 1000 per piece’ chargeable @ 12% as per Notification No.1/2017-CT(Rate) dated 28.06.2017;
  • As per the Advance Ruling Authority, ‘Rakhi’ is not an essential and integral part of any Puja or Religious Ceremony to pay obeisance to any deity.  Serial number 148 of the Exemption Notification lists the items to be considered as Puja Samagri and “Rakhi” is not listed therein. ‘Rakhi’ therefore cannot attract NIL rate of duty;
  • For classification of ‘Rakhi’ under the schedule I or II of notification no. 1/2017, the definition of ‘made up’ article as per chapter 63 does not include ‘Rakhi’
  • ‘Rakhi’ is an independently identifiable product and is also known in common and commercial parlance. The multifarious constituents that go into the making of the “Rakhi” cannot be considered as accessories; the material which provides the essential character to “Rakhi” is varied and the buyer may also be motivated to purchase the same as much for its for its designer/decorative/fancy part, as for its symbolic characteristic of a bond of protection;
  • ‘Rakhi’ will attract GST as per the classification in which the essential character that defines it, lies.

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