Amusement Park rides cannot be classified as Motor Vehicle, will attract GST @ 18%

By:
Categories: Advance Ruling-New

The AAR, Karnataka in the matter of M/s KNK Karts (P) Ltd [Advance Ruling No. KAR ADRG 20/2022 dated August 12, 2022] has held that the amusement park ride karts (“the Product”) cannot be classified as Motor Vehicle and will attract GST @ 18% under HSN 9503 of the Customs Tariff Act, 1975 (“the Customs Tariff Act”).

Facts:

M/s KNK Karts (“the Applicant”) has manufactured amusement park ride karts (“the Product”) and supply them for joy riding both for children and adults. The Product was neither roadworthy nor meant for transportation or carrying of passengers. The Automotive Research Association of India, an authority established to certify that the Product is not permitted on public roads and are not fit for certification and hence cannot be registered with the Regional Transport Authority (“the RTO”) as Motor vehicle. The Applicant were of the impression that the Product are classified under HSN 9503 of the Customs Tariff Act whereas the Central Excise Department insisted them to classify the Product under HSN 8703 of the Customs Tariff Act and pay GST at the rate of 28% in terms of Notification No.1/2017-Central Tax -Rate dated June 28, 2017.

Applicant’s Contention:

  • The Product manufactured and supplied by them comprise of scale model karts and are supplied with an engine, transmission and tyres. In some cases, the same are supplied as a ‘rolling chassis’ comprising of a chassis frame with no engine, transmission or tyres.
  • The legislature has amended the First Schedule to the Customs Tariff Act with effect from January 01, 2022 based on realignment of the Explanatory Notes to HSN. The amended HSN 9503 of the First Schedule to the Customs Tariff Act specifically covers ‘Amusement Park Ride Karts’ commonly known as ‘Go-karts’.
  • As per the Motor Vehicles Act 1988 (“the Motor Vehicle Act”) children below the age of 18 years are not permitted to ride or drive motor vehicles and require driving license to drive the vehicle. In case of violations, the vehicles will be seized and the person driving the vehicle will be fined and also imprisoned for the contraventions of the statute. However, no such restrictions are imposed under any of the statute to use the said Product by children below the age of 18 years.

Issues:

  • Whether the Product supplied by the Applicant meant solely for the purpose of joy riding and are designed and shaped to suit to run or drive only on extremely smooth surfaced tracks, are classifiable under HSN 9508 of the First Schedule to the Customs Tariff Act?
  • Whether the Product supplied by the Applicant which are not roadworthy and cannot be registered as Motor Vehicles with the RTO are classifiable as ‘Motor Vehicles meant for carrying of passengers under HSN 8703 of the First Schedule to the Customs Tariff Act?
  • Whether the Product supplied by the Applicant attracts GST at the rate of 18% under Notification No.1/2017-Central Tax Rate dated June 28, 2017 as amended by Notification No.18/ 2021-Central Tax Rate dated December 28, 2021?
  • Whether the Product supplied by the Applicant are covered under HSN 8703 or HSN 9503 of the Customs Tariff Act?

Held:

The AAR, Karnataka in Advance Ruling No. KAR ADRG 20/2022 dated August 12, 2022 has held as under:

  • The expression ‘motor car’ or ‘motor vehicle’ used in the HSN are defined under Section 2 (26) and (28) of the Motor Vehicle Act. The Product supplied by the Applicant neither qualify as motor car nor motor vehicle as they are not road worthy and are also not designed for transport of persons and are meant only for amusement or entertainment for use on a fixed or restricted course. Hence, they are not classifiable under HSN 8703.
  • The First schedule to the Customs Tariff Act has been amended with effect from January 01, 2022 and the amended HSN 9508 covers “travelling circuses and travelling menageries; amusement park rides and water park amusements” and further the meaning of amusement park rides is given in the notes of the HSN.
  • The Product supplied by the Applicant are designed and shaped to run only on extremely smooth specially designed surfaced tracks and are primarily used across the globe as an amusement ride. Therefore, the same may be considered as amusement park rides as per the meaning assigned to amusement park rides.
  • The Product supplied by the Applicant attracts GST at the rate of 18% as per Notification No.1/ 2017-Central Tax (Rate) dated June 28, 2017 as amended by Notification No.18/ 2021-Central Tax (Rate) dated December 28, 2021.

Relevant Provisions:

S. No.

Chapter/ Heading / Sub-heading / Tariff item Description of Goods
441A 9508

Travelling Circuses and Travelling Menageries; Amusement Park Rides and Water Park Amusements; Fairground Amusements, including Shooting Galleries; Travelling Theatres

 

Tariff Item

Description of Goods

8703

Motor cars and other motor vehicles principally designed for the transport of persons (Other than those of heading 8702), including station wagons and racing cars
870310

 -Vehicles specially designed for travelling on snow; golf cars and similar vehicles:

87031010

— Electrically operated
87031090

— Other

Chapter Note 6. For the purposes of heading 95.08:

(a) The expression “amusement park rides” means a device or combination of devices or equipment that carry, convey, or direct a person or persons over or through a fixed or restricted course, including watercourses, or within a defined area for the primary purposes of amusement or entertainment. Such rides may be combined within an amusement park, theme park, water park or fairground. These amusement park rides do not include equipment of a kind commonly installed in residences or playgrounds.

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.

Live GST Course (With Recording Available) on:

Scrutiny Notices, Assessment, Audit, Inspection, Search, Seizure and Arrest under GST by CA. Bimal Jain

3 Day | 3 Session | 9 Hours

September 03 | 3:00 – 6:00 PM, September 04, September 11 | 10:00 AM – 1:00 PM (IST)

2,999/- (Inclusive of GST)

Register Now !!

https://www.a2ztaxcorp.in/product/gst-course-new/

For details, or any queries, 

Call us at: 8076563802, 011 42427056 or E-Mail us at: info@a2ztaxcorp.com, intern@a2ztaxcorp.com or Visit: www.a2ztaxcorp.in

Your Thoughts