M/s Rossi Gear motors India Private Limited No. 256, Trichy Road, Kannampalayam, Coimbatore-641-402 (hereinafter referred as ‘Applicant’) is registered under the GST Act, 2017 Vide GST No. 33AADCR6650FIZJ. The  Applicant has sought Advance Ruling on the following questions:

“1. Whether the geared motor is to be classified under 8501 or under 8483 for the purpose of payment of GST?

2. Whether the geared motor can be considered as gears and gearings?

3. Whether the rate of CGST/SGST as per Notification No. 1/2017-C.T. (Rates) and GO (Ms) No. 62, dated 29-6-2017 is –

(a) 9% as per Schedule-III (Sl. No. 372); (OR)

(b) 9% as per Schedule-III (Sl. No. 369A); (OR)

(c) 14% as per Schedule-IV (Sl. No. 135)”.

The Applicant submitted copy of Challan evidencing payment of application fees of ₹ 5,000/- each under sub-rule (1) of Rule 104 of CGST Rules, 2017 and SGST Rules, 2017.

2. The Applicant has stated that the Electric Motor is a bought out item. Gear boxes are assembled by them. Gear boxes and Electric Motor is coupled and integrated and supplied by them as “Geared Motor”. The principal and predominant function of Geared Motor, which is transmission of power for the required application by changing the speed and torque, is that of the Gear Box. The Applicant has also stated that the Electric Motor converts electrical energy into Mechanical energy and it is not a speed or “Torque Converter”. Mechanical energy has to be transmitted in specific requirement for the function of another device for which gear is required. Gearbox coupled with electric motor is a transmission machine in a power transmission system, which provides controlled application of the power. Often the term transmission refers simply to the gearbox that uses gears and gear trains to provide speed and torque conversions from a rotating power source to another device. Geared motor is a single unit consisting of gear box and electric motor. Electric motor is a bought out item. Gear boxes are manufactured by them. Gear boxes and electric motor is coupled and integrated and it is a “mixed supply”. It is supplied by them as gear motor. The principal and predominant function of gear motor, which is transmission of power for the required application by changing the speed and torque, is that of the gear box. Thus, the Applicant states that the principal supply is gear box. Gear/ gear rings cannot be equated with the gear motor.

2.1 The Applicant has further stated that the Chapter 85 is governed by Section Notes to Section XVI of the First Schedule to the Customs Tariff Act, 1975. The following Section Notes are crucial to determine the classification of gear motors.

“3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.

4. Where a machine (including a combination of machines) consists of individual components (Whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, than the whole falls to be classified in the heading appropriate to that function”.

5. For the purposes of these Notes, the expression “machine” means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85″.

In view of the above Section Notes, the GEAR MOTOR has to be classified according to the principal function, which is conversion of speed and torque at the time of transmission of energy. Therefore, the Gear Motor is to be classified as “gear box” falling under 8483 in view of the above section notes. Further in terms of clause 30 of Section 2 and Section 8(a) of the TNGST Act, 2017, the tax liability has to be determined according to the principal supply. The principal supply is gear box and accordingly the gear motor will fall under 8483. Sl. No. 135 of Schedule IV of Notification GO (Ms) No. 62, dated 29-6-2017 specifically covers the gearboxes including speed changers and torque converters, which are not specified in Sl. No. 369A and 372 of Schedule Ill of the said notification. Therefore, the rate of SGST is 14%.

3.1 The authorized representative of the applicants/ Shri. S. Durairaj, Advocate and R. Rajesh Kumar, Company Secretary appeared for the hearing on 19-11-2018. They stated that they import gear boxes and procure motors locally and combining both to make geared motors. They undertook to submit import invoice, sale invoices, write-up of manufacturing and Purchase Order in 2 weeks. They furnished a written submission wherein they stated that it is a mixed supply of gear motor as the gear boxes and electric motor is coupled. The principal and predominant function of gear motor, which is transmission of power for the required application by changing the speed and torque, is that of the gear box and hence the principal supply is gear box. During prc GST period, this product was classified under 8483 as per Central Excise Tariff Act, 1985. In the GST regime, the Applicant has classified the same under 8483 of the Customs Tariff Act and paid  CGST (Sl. No. 135 Schedule-IV of Notification 1/2017-Centra1 Tax (Rate) &  SGST of corresponding TNGST Notification 62 CT&R (B1), dated 29-6-2017 (Sl. No. 135 of Schedule-IV of the TNGST Act, 2017). Till 14-11-2017, the entire Chapter Heading 8483 (Transmission shafts (including cam shafts and crank shafts) and cranks; bearing housings and plain shaft bearings; gears and gearing; ball or roller screws; gear boxes and other speed changers, including torque converters; flywheels and pulleys, including pulley blocks; clutches and shaft couplings (including universal joints)) was covered by Sl. No. 135-Schedule IV of Notification 1/2017. Vide Notification 41/2017-C.T. (Rate), dated 14-11-2017, portion of heading 8483 i.e. “Crank shaft for sewing machine, bearing housings; plain shaft bearings; gears and gearing; ball or roller screws” were shifted to the rate of 9% CGST in terms of Notification 1/2017-Central Tax (Rate) (Schedule-III – Sl. No. 369A). However, their product under consideration is still retained in Sl. No. 135 of Schedule IV of Notification No. 1/2017-C.T. (Rate), dated 28-6-2017. Based on the decision of the Authority for Advance Ruling, Gujarat in the case of Power Build (P) Ltd. [2018 (14) G.S.T.L. 85 (A.A.R. – GST)], wherein it is held that gear motors fall under CTH 8501, their customers have been demanding the applicant to charge CGST on the above product at the rate of 9%, under Heading 8501.

3.2 The Applicant submitted the technical write-up, Product Photos, List of materials used for Gear motor without motor, gear motor with motor, Gear reducers or Gearbox and company profile. The Applicant also submitted sales invoices, customer purchase order copy, import invoice, Bill of Entry and Motor Purchase invoice (local) in respect of Gear motor – with motor (motor locally procured) on 9-12-2018. The Technical write-up is as below :

1. Gear Motor :-

A gear motor is a single component that integrates a gear reducer with an electric motor. Gear motors can deliver high torque at low  horsepower or low speed. This is because the gearhead functions as  a torque multiplier and can allow small motors to generate higher  torque. In addition, a common way to categorize gear motors is by  the type of gearing used. So there are a number of choices for the  gear motors. Common types of gears that can be paired with a mo tor to form a complete gear motor include bevel, helical, spur and  worm gears.

2. Gear Reducer :

Gear Reducers or gearboxes are used to increase torque while reducing the speed of a prime mover output shaft. This means that the output shaft of a gearbox rotates at a slower rate than the input shaft, and this reduction in speed produces a mechanical advantage,  increasing torque. Common types of gear reducers are bevel, helical, spur and worm gears.

3. Electric Motor :

 An electric motor is an electrical machine that converts electrical energy into mechanical energy. Most electric motors operate through  the interaction between the motor’s magnetic field and winding  currents to generate force in the form of rotation.

General-Purpose motors with standard dimensions and characteristics provide convenient mechanical power for industrial use.

4. The applicant was offered an opportunity to be heard again on 12-3-2019 due to change in the SGST Member of the Authority and was heard. The Applicant appeared and reiterated the written submissions made by the Applicant. They stated that HSN Explanatory Notes states the product to be classified under 8501. However, Chapter Notes seems to state it as 8483 as a mixed supply. However, from January 2019, 8483 is also under 18%, though it was 28% before. In central Excise, they were classifying as 8483.

5. The various documents submitted by the applicant were examined. The company profile indicates that the applicant supplies gear reducers and gear motors of various types such as worm, coaxial, helical and bevel-helical. The purchase order shows “Geared Motor” “worm gear Motor” with specifications and the corresponding sale invoices show “Worm gear motor “with HSN 8483. The relevant import invoice from related party shows “Worm gear motor without motor” and the import Bill of entry for “worm gear motor without motor (part for gear motor) with HSN 8483 40 00. The purchase of motor for this from an Indian firm is classified under HSN 8501 52 10. In other cases they are importing both gear reducers and gear motor. They are not mentioning any HSN code in the related party import invoice.

6. The Jurisdictional Officer of the Applicant, Commissioner of GST & Central Excise, Coimbatore has furnished the comments on the Application. The jurisdictional authority has stated that it is reported that in an identical case, the application filed by M/s. Power Build Private Limited, Anand Sojitra Road, Vallabh Vidhyanagar, Anand, Gujarat-388 120, has been decided, vide Advance Ruling No. GUJ/GAAR/R/2017-18/2 (In Application No. Advance Ruling/SGST & CGST/2017-18/AR/8), dated 13-12-2017 and the operative portion of the Ruling which leads to the decision is extracted and reproduced below :

“The product “Geared Motor” is classifiable under Chapter Heading 8501 of the Customs Tariff Act, 1975 and Goods and Services Tax rate applicable to Chapter Heading 8501 is applicable to the said product.”

The jurisdictional authority has opined that the fact of the case is squarely applicable to the present case in the matter of classification.

7. The various submissions made by the Applicant and the comments furnished by the jurisdictional authority were examined. We find that the Advance Ruling is sought on :

1. Whether the geared motor is to be classified under 8501 or under 8483 for the purpose of payment of GST?

2. Whether the geared motor can be considered as gears and gearings?”

3. Whether the rate of CGST/SGST as per Notification No. 1/2017-C.T. (Rates) and GO (Ms) No. 62, dated 29-6-2017 is –

(a) 9% as per Schedule-Ill (Sl. No. 372); (OR)

(b)  9% as per Schedule-Ill (Sl. No. 369A); (OR)

(c)  14% as per Schedule-IV (Sl. No. 135)”.

In terms of explanation (iii) and (iv) contained in the Notification No. 1/2017-C.T. (Rate), dated 28-6-2017, “Tariff item”, “sub-heading”, “heading” and “Chapter” shall mean respectively a tariff item, sub-heading and Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First schedule shall, so far as may be, apply to the interpretation of this notification. Accordingly, to arrive at the classification, the respective chapter headings, Chapter Note, Section Notes are to be seen.

7.1 From the various submissions of the applicant, it is evident that the applicant is engaged in the manufacture of Geared motors which consists of Electric motor and Gear boxes. Electric Motor is a bought out item either locally or imported from their related party. Gear reducers or gear boxes are imported from their related party. Both are assembled in India by the applicant depending on the specifications given by their buyers. Gear motor is a single unit consisting of gear box and electric motor, coupled and integrated.

Customs Tariff Heading 8483 of Customs Tariff Act, 1975, reads as follows :

The Explanatory Notes for ‘Gear Boxes and other Speed Changers, including Torque Converters’ under Tariff Heading 8483 of the Harmonised System of Nomenclature provides as follows :-

(E) GEAR BOXES AND OTHER SPEED CHANGERS,

INCLUDING TORQUE CONVERTERS

These provide a range of speeds which can be varied, either by hand or automatically, according to the requirements of the machine. They include, inter alia :

(1) Gear-boxes consisting of assemblies of gears which can be selected in alternative arrangements; the speed of transmission can thus be varied according to the arrangement of gears set.

———-

The heading does not cover gear boxes or other variable speed changers combined with a motor; these are classified in the same heading as the motor.

It is seen from the above that gear boxes of all kinds are classifiable under Tariff Heading 8483. The Explanatory Notes to 8483 clearly specify that this heading does not cover gear boxes combined with a motor and they are to be classified in the same heading as motor.

7.2 Customs Tariff Heading 8501 reads as follows :

The Explanatory Notes for ‘Electric Motors’ under Tariff Heading 8501 of the Harmonised System of Nomenclature, inter alia, provides as follow :-

(1) ELECTRIC MOTORS

Electric motors are machines for transforming electrical energy into mechanical power. This group includes rotary motors and linear motors.

…………….

With the exception of starter motors for internal combustion engines (heading 85.11), the heading covers electric motors of all types from low power motors for use in instruments, clocks, time switches, sewing machines, toys, etc., up to large powerful motors for rolling mills, etc.

Motors remain classified here even when they are equipped with pulleys, with gears or gear boxes, or with a flexible shaft for operating hand tools.

It is seen from the above that electric motors of all kinds are classifiable under Tariff Heading 8501 and as per explanatory notes they remain classified here even when they are combined with gears or gear boxes.

7.3 Section Notes 3 to 5 of Section XVI covering Chapter 84 and 85 of the First Schedule to the Customs Tariff Act, 1975 states :

“3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function”

4. Where a machine (including a combination of machines) consists of individual components (Whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, than the whole falls to be classified in the heading appropriate to that function”.

5. For the purposes of these Notes, the expression “machine” means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85″

It is seen from the above that composite machines with individual components intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, than the whole falls to be classified in the heading appropriate to that function and are to be classified as being that machine which performs the principal function.

In the case at hand, Gear Reducers or gearboxes are used to increase torque while reducing the speed of a prime mover output shaft. The electric motor is an electrical machine that converts electrical energy into mechanical energy. The applicant is supplying Gear motor which is a single component that integrates a gear reducer with an electric motor. It is a transmission machine in a power transmission system, which provides controlled application of the power i.e. Gear motors can deliver high torque at low horsepower or low speed. In this instance geared motors combine two machines gearboxes and electric motors to provide the function of converting electrical energy to mechanical energy in a controlled manner giving control over the torque generated m moving any attached transmission shaft. Therefore, the principal function is the conversion of electrical to mechanical energy as per Section Notes 3 and 4 of Section XVI. This is also supported by HSN Explanatory Notes to Chapter 8483 and 8501. The Explanatory notes of Chapter Heading 8483 specifically excludes ‘gear boxes or other variable speed changers, combined with a motor’ and is stated that such products are to be classified in the same heading as ‘Motor’; Further, the Explanatory notes to Chapter 8501 specifically states that ‘Motors remain classified here even when they are equipped with gears or gear boxes… ‘ In the purchase order and sale invoice of the applicant it is seen that the supply is a geared motor which is a single supply and not two individual supply of gear boxes and electric motors. They are fitted together, assembled and supplied by the applicant. Therefore, this is not a mixed supply as claimed by the applicant. In view of the above, we hold that the ‘Gear Motor’ is rightly to be classified under CTH 8501.

8. The next question on which advance ruling is sought is ‘Whether the gear motors can be considered as ‘gears’ and ‘gearings’. The applicant has not elaborated the question. From the submissions it is inferred that ‘gears and gearings’ without motors are mentioned as ‘Gears and gearings’ while gearbox with motor are termed as ‘Gear motors’. However, Section 97(2) of the CGST Act / Tamil Nadu GST Act (TNGST) which gives the scope of Advance Ruling Authority, i.e., the question on which the Advance Ruling can be sought is reproduced as under :

97(2) The question on which the advance ruling is sought under this Act, shall be in respect of, –

(a) classification of any goods or services or both;

(b) applicability of a notification issued under the provisions of this Act;

(c) determination of time and value of supply of goods or services or both;

(d) admissibility of input tax credit of tax paid or deemed to have been paid;

(e) determination of the liability to pay tax on any goods or services or both;

(f) whether applicant is required to be registered;

(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

The Act limits the Advance Ruling Authority to decide the issues earmarked for it under Section 97(2) and no other issue can be decided by the Advance Ruling Authority. The question raised does not fit in any of the clauses (a) to (g) above and therefore not answered for the reason not within the ambit of this authority.

9. The last question raised is whether the rate of CGST/SGST as per Notification No. 1/2017-C.T. (Rates) and GO (Ms) No. 62, dated 29-6-2017 is –

(a) 9% as per Schedule-Ill (Sl. No. 372); (OR)

(b) 9% as per Schedule-Ill (Sl. No. 369A); (OR)

(c) 14% as per Schedule-IV (Sl. No. 135).

As discussed in Para 7 above, the ‘Gear motors’ are classifiable under CTH 8501. The entry at Sl. No. 372 of Notification No. 1/2017-C.T. (Rates) and Notification No. vide C.O. (Ms) No. 62, dated 29-6-2017 is given below :

Therefore the rate applicable to ‘Gear motors’ classifiable under CTH 8501 is 9% CGST/SGST as per Sl. No. 372 of Schedule III of Notification No. 1/2017-C.T. (Rate), dated 28-6-2017 and Notification No. vide G.O. (Ms) No. 62, dated 29-6-2017 as amended.

10. In view of the foregoing, we rule as under

RULING

(i) The ‘Gear Motors’ supplied by the applicant are to be classified under CTH 8501.

(ii) The Question whether the gear motors can be considered as gears and gearings is not answered under Section 98(2) of the Act as not covered under the purview of Section 97(2) of the Act

(iii) The rate of CGST/SGST applicable on the ‘Gear motors’ is 9% CGST & 9% SGST as per Sl. No. 372 of Schedule-Ill of Notification No 1/2017-C.T. (Rate), dated 28-6-2017 and dated 29-6-2017