2018 (7) TMI 390 – AUTHORITY FOR ADVANCE RULINGS, WEST BENGAL – 2018 (15) G. S. T. L. 94 (A. A. R. – GST) – Classification of “Rakhi” – whether exemption under N/N. 2/2017-Central Tax (Rate) dated 28/06/2017 (1126-FT dated 28/06/2017 of State Tax), is applicable for such manufacture, and if not, the taxability of the same?
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Held that:- “Rakhi” is not an essential part of any Puja or Religious Ceremony to pay obeisance to any deity. Mere inclusion of “Rakhi” in a Puja Thali at the discretion of either the Customer or the Supplier does not make it an integral and essential part of Puja Samagri. Serial number 148 of the Exemption Notification lists the items to be considered as Puja Samagri and “Rakhi” is not listed therein.
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“Rakhi”, therefore, cannot attract NIL rate of duty under Serial No 9(1) of FAQ dated 03.08.2017 (later, Serial No 92(1) of F. No 332/2/2017-TRU issued by the Tax Research Unit, Govt of India, Ministry of Finance, Department of Revenue) – The “Rakhi”s the
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the same as much for its for its designer/decorative/fancy part, as for its symbolic characteristic of a bond of protection.
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Ruling:- The Applicant has to classify the goods “Rakhi” as per its constituent materials in accordance with Rule 3(c) of Rules for Interpretation of the Customs Tariff Act, 1975, as laid down in Explanatory Notes (iv) of Notification No 1/2017-CT(Rate) dated 28.06.2017.
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Rakhi will attract GST in accordance to its classification as stated above.
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Exemption under Notification No. 2/2017-Central Tax (Rate) dated 28/06/2017 is not applicable for “Rakhi”. – ARN No. 11 of 2018 and 08/WBAAR/2018-19 Dated:- 5-7-2018 – VISHWANATH AND PARTHASARATHI DEY MEMBER Applicant s representative heard: Rahul Dhanuka, Legal Representative 1. The Applicant, stated to be a Manufacturer of the item Rakhi , is seeking a Ruling on classification of Rakhi , on whether exemption under Notification No. 2/2017-Central Tax (Rate) dated 28/06/2017 (1126-FT dated 28/06/2017 o
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a; b) The Rakhi s shall be manufactured in-house as well on job-work basis. Most of the people employed in the Rakhi industry belong to economically weaker sections and inter alia include housewives and widows who manufacture Rakhi s to earn a livelihood. Traditionally Rakhi has been considered a handicraft item and the manufacture or making of Rakhi invariably involves skilful pasting or attaching decorative items to threads; c) Rakhi is an ancient festival; d) Traditionally Rakhi used to be made up only of Kalava (i.e. cotton threads of red/orange colour); e) Rakhi was exempt from payment of VAT under several States, as well as from Central Excise duty under the earlier Tax Structure since it was considered as handicraft ; f) The Exemption Notification exempts Kalava (raksha sutra) from payment of GST since it is listed as puja samagri ; g) Reference has been made on FAQ published on CBEC website dated 03.08.2017; h) Reference has been made to Rule 3(b) of the Rules for Interpretatio
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r from the Application whether or not Rakhi s are already being manufactured by them, whether or not craftspeople from economically backward classes are being employed by them or the process undertaken for the manufacture of Rakhi s. However, on being specifically asked the Applicant has stated that till the time of filing the Application for Advance Ruling the manufacturing of Rakhi had not been begun by the unit. However, the Applicants admitted, that the manufacturing process of Rakhi has been started in their unit. Hence, all references in the Application of the Applicant intending to manufacture is being taken up in the spirit of already manufacturing and discussed accordingly. It appears from the Partnership Deed dated 31.03.2008 submitted by the Applicant that M/s M D Mohta has been in existence from 13.04.1987, if not earlier, and Partnership Deed dated 31.03.2008 submitted by the Applicant incorporates M/s M D Mohta Rakhi Pvt Ltd as the third Partner with claim to 50% of the s
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ity of Notifications and Taxability of supplies are to be considered in the context of GST. Any reference to Notifications and Taxability of the earlier Tax regimes are to be considered only insofar as they have relevance in the GST regime. Notification No 32/2017-Central Tax dated 15.09.2017, later amended as Notification No 38/2017-Central Tax dated 13.10.2017, provides a list of articles which are to be considered as handicraft goods for the purpose of GST when made predominantly by hand by the craftsmen even though some machinery may also be used in the process. Rakhi does not feature in this list. Hence, Rakhi cannot be considered as handicraft for the purpose of GST. 6. The Applicant suggests that if Rakhi is not considered to be exempt then it may be classifiable under and taxability determined in accordance to Serial No 224 of Schedule I and Serial No 171 of Schedule II of the Rate Notification. The Applicant, on being specifically asked, has also stated that one of its partner
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of this section, the expression "made up" means: (a) Cut otherwise than into squares or rectangles; (b) Produced in the finished state, ready for use (or merely needing separation by cutting dividing threads) without sewing or other working (for example, certain dusters, towels, tablecloths, scarf squares, blankets); (c) Hemmed or with rolled edges, or with a knotted fringe at any of the edges, but excluding fabrics the cut edges of which have been prevented from unravelling by whipping or by other simple means; (d) Cut to size and having undergone a process of drawn thread work; (e) Assembled by sewing, gumming or otherwise (other than piece goods consisting of two or more lengths of identical material joined end to end and piece goods composed of two or more textiles assembled in layers, whether or not padded); or (f) Knitted or crocheted to shape, whether presented as separate items or in the form of a number of items in the length. Clearly, Rakhi cannot be described as a
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hi ), is the festival which is observed on the last day of the Hindu lunar calendar month of Shraavana, and on this day, sisters of all ages tie a Rakhi , around the wrists of their brothers, traditionally investing the brothers with a share of the responsibility of their potential care. The expression "Raksha Bandhan," Sanskrit, literally, "the bond of protection, obligation, or care," is now principally applied to this ritual. Rakhi , which the Applicant intends to manufacture, is this object which symbolises the bond of protection and is tied round the wrist of the brother. History records variations of this ritual, but whatever the variation the emphasis is to denote the bond between the protector and the person in need of protection. Notable among these variations is the tying of Rakhi s among Muslims and Hindus as a form of protest against the Partition of Bengal in 1905. Leonard Elmherst's memoir Poet and Plowman records that Tagore transformed the religi
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he emphasis was on the feeling of brotherhood and the need to protect the weak by the strong. Traditionally, and in all its variations, it is thus seen that the Rakhi is an object symbolising a sentiment and/or conveying a message. By no stretch of imagination can a Rakhi , or the ritual of Rakhi be linked to religious ceremonies or rituals involving deities. References have been found to Sri Radha tying Rakhi on Shri Krishna. But here again, the reference is to the symbolic gesture of the need of protection. Rakhi , in other words, is not an essential part of any Puja or Religious Ceremony to pay obeisance to any deity. Mere inclusion of Rakhi in a Puja Thali at the discretion of either the Customer or the Supplier does not make it an integral and essential part of Puja Samagri. 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 under Serial No 9(1) of FAQ
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ich are being manufactured are not always of Cotton thread. Other elements mentioned are Zari, Nylon and Silk Threads. Even these are not exhaustive. The Applicant may use other forms of material to enable the Rakhi s being tied on the wrist. The Rakhi s which are being manufactured include Decorative Rakhi , Designer Rakhi , & Fancy Rakhi . This again, is not an exhaustive list of the kind of Rakhi s being manufactured. The Applicant may manufacture other variants of Rakhi too. The mention of Glass Beads, Plastic Beads, Coloured Stones, Metal Pendants and Rudraksha also clearly points to the fact that what the Applicant intends to manufacture are not merely Cotton threads in the form of yarn of specifically red and yellow in colours, in other words these rachis are not in the form of Kalava . This is also obvious from the pictures submitted by the Applicant of the Rakhi s that will be manufactured by them. Serial No 92(2) of the TRU Clarification is not applicable to the Rakhi s m
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ce. In the case of Rakhi , the item is supplied by the Applicant, as Decorative/Designer/Fancy/Kids Rakhi and customers are being motivated to buy the Rakhi s due to the specific characteristic which makes the Rakhi Decorative/Designer/Fancy/Kid s and not merely to put round the wrist. 12. The various components which go into the making of Rakhi are innumerable of no fixed or predetermined ratio and both, the variety and the proportion in which they are used do not follow any fixed formula but are at the Manufacturer s will. The resultant products are identifiable as new items, independent in manner and form of its constituent materials, and cannot be stated to be a mere assemblage of its constituent materials. In other words, Rakhi retains its specific identity as a symbol of a bond involving the potential care of the sister by the brother, and not merely a conglomeration of discrete materials, is clearly not classifiable under a single Tariff code. Moreover, under the GST Act the ide
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value of the product. It is also clear from the TRU Clarification that it is a recognised and admitted fact that numerous materials are used in the making of Rakhi and in the absence of any specific Tariff Code a Rakhi can be considered an article of any of these constituent materials. Rule 3(c) of the Interpretation Rules, requires to be resorted to, then, for the classification of Rakhi . Rule 3(c) of the Interpretation Rules, states that When goods cannot be classified by reference to 3(a) [heading most specific] or 3(b) [applicable to mixture, composite goods and goods put up in sets for retail sale] they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration . A typical Rakhi , as evidenced in the pictures submitted by the Applicant of Rakhi s intended to be manufactured by them, will have a i) cord/twine or any material to enable it to be put round the wrist; ii) one or many items made of different materials which
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Rule 3(c), this Rakhi will be classifiable under Chapter 70/71 and will attract GST accordingly. Again, in item number RR-757, the declared constituent materials are metal pendant, stone ring, metal moti, cotton thread and plastic beads falling under Chapter 71 to 81 (depending on the metal), Chapter 70/71 (depending on the nature of the stone), Chapter 52, Chapter 39. Assuming that there are no other constituent materials undeclared in the literature submitted by them, under Rule 3(c) this Rakhi will be classifiable under Chapter 71 to 81 (depending on the metal) and attract GST accordingly. 14. The Applicant states that the intention is to supply Rakhi , including but not limited to, decorative Rakhi , Designer Rakhi , & Fancy Rakhi and these Rakhi s consist of, inter alia, Cotton thread, Zari thread, Silk Thread, Nylon Thread, Glass Beads, Plastic Beads, Coloured Stones, Metal Pendants and Rudraksha. On being asked specifically whether or not the list of materials constituting t
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ependently identifiable item and the materials that go into the making of a Rakhi cannot be held as mere accessories.The judgement in the case of A V Venkateswaran, Collector of Customs, Bombay vs Ramchand Sobhraj Wadhwani And Another [1983 (13) ELT (1327 (SC)] too, is not relevant to the instant case since Rakhi is an independently identifiable item and it is not a case of a general classification gaining precedence over a specific classification. The judgement in the case of A. Nagaraju Bros vs State of Andhra Pradesh [1994 (72) ELT 801 (SC)] again, is not relevant to the instant case since Rakhi is known as such in both, common and commercial parlance and the predominant material that goes into the making of a Rakhi varies at the manufacturer s will. The judgement in the case of Kemrock Industries & Exports Ltd vs Commr of C. Ex, Vadodara [2007 (210) ELT 497 (SC)] held that composite goods are to be classified on the basis of material or component that gives the product its esse
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made up of innumerable materials of no fixed or predetermined ratio, and yet retain its specific identity as a symbol of a bond involving the potential care of the sister by the brother, and not merely an assemblage of discrete materials. Rakhi cannot be termed as a handicraft item under GST under Notification No 32/2017- Central Tax dated 15.09.2017, (later amended as Notification No 38/2017-Central Tax dated 13.10.2017). It is also seen that Rakhi is not purely puja samagri as it is not an essential and integral part of any Puja or Religious Ceremony to pay obeisance to any Hindu deity, and that Rakhi has been historically used to emphasise the bond between Hindus and Muslims. Rakhi , therefore, cannot attract NIL rate of duty under Serial No 92(1) of the TRU Clarification, nor can it be considered exempt in terms of Serial no. 148 of the Exemption Notification since it is not listed therein. With reference to the list of various materials submitted along with the Application for the
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cation and Rakhi is to be classified in terms of Rule 3(c) of the Interpretation Rules and will be leviable to GST accordingly. 17. The case laws referred to by the Applicant have been considered carefully. It is seen that Rakhi is an independently identifiable product and is also known to be so 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. In view of the foregoing we rule as under RULING The Applicant has to classify the goods Rakhi as per its constituent materials in accordance with Rule 3(c) of Rules for Interpretation of the Customs Tariff Act, 1975, as laid down in Explanatory Notes (iv) of Notification No 1/2017-CT(Rate) dated 28.06.2017 (Note (v) o
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