5% GST on Marine Engines and Gearboxes Used in Vessels
Marine engines and gearboxes attract 5% GST instead of 28% when supplied specifically as parts for eligible ships and boats.
- Ruling
- NO.GST-ARA- 44/2017-18/B- 51, Mumbai, dt. 15/6/2018
- Dated
- 15 Jun 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Marine engines and gearboxes generally attract 28% GST under standard machinery tariff codes.
- The company asked if supplying them for vessels qualifies for 5% GST.
- The tax authority ruled that supplying them as ship parts attracts 5% GST.
- Using these items for non-marine purposes brings the GST rate back to 28%.
In short
Shandong Heavy Industry India Pvt. Ltd imports and assembles marine diesel engines, gearboxes, and spare parts. Standard machinery classified under Chapter 84 carries a high 28% GST rate, while parts used for ships and boats under Chapter 89 carry a lower 5% GST rate. The company asked the Maharashtra Authority for Advance Ruling (AAR) in order GST-ARA-44/2017-18/B-51 whether its sales to shipyards qualify for the 5% concessional rate.
What has changed
How it worked before
Before this ruling, suppliers were uncertain whether general machinery like engines and gearboxes could qualify for the lower 5% GST rate meant for ship parts. Many businesses either charged 28% GST to stay safe or charged 5% without knowing if tax officers would accept it during an audit.
What has changed
The tax authority ruled that marine diesel engines and gearboxes qualify for the 5% GST rate under Entry 252 of Schedule I when supplied specifically as parts for eligible vessels. This significantly lowers the tax burden for shipbuilders and equipment suppliers. However, if the same machinery is sold for general industrial use, the 28% GST rate applies.
Who this affects
Manufacturers, importers, and distributors supplying marine engines, gearboxes, and machinery spare parts to shipyards, boat builders, and vessel repairers in India.
An example
A marine equipment supplier in Goa sells a diesel engine to a local shipyard constructing fishing trawlers. The supplier wants to know whether to charge 28% GST for engines or 5% GST for ship parts. Following the principle in this ruling, if the supplier receives documentation proving the engine is installed directly into an eligible fishing vessel, charging 5% GST is justified. If that same engine is sold to a factory for a generator set, the supplier must charge 28% GST.
What you should do
Suppliers claiming the 5% GST rate must collect clear end-use certificates and purchase orders proving integration into eligible ships. Businesses must remember that an advance ruling legally binds only the company that applied for it and its tax officer. Other suppliers can use this ruling to understand tax authority thinking, but should maintain proper documentation or seek their own ruling before lowering their tax rate.
If you do nothing
If a business charges 5% GST without maintaining end-use proof, tax officers can reclassify the supply under the 28% machinery rate. The tax department will demand the 23% short-paid tax along with interest and penalties. This unexpected tax demand can severely damage a business's cash flow.
The terms explained
- advance ruling
- An official written decision by tax authorities answering a specific business's question about how GST law applies to its sales or purchases.
- concessional rate
- A reduced tax rate offered by the government on specific goods or services to support an industry or lower costs for buyers.
- input tax credit
- The GST a business pays on its purchases, which it can subtract from the GST it collects on its sales before paying the balance to the government.
The ruling in detail
Authority for Advance Ruling
Shandong Heavy Industry India Pvt. Ltd
NO.GST-ARA- 44/2017-18/B- 51, Mumbai, dt. 15/6/2018 · Maharashtra
Questions before the authority
- Whether the classification of Marine Diesel Engine falling under TSH 8408 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST + 14% SGST) as per Schedule IV (Sr. No. 115) of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017 is correct or not?
- Whether the classification of Gear Box falling under TSH 8483 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST + 14% SGST) as per Schedule IV (Sr. No. 135) of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017 is correct or not?
- Whether the goods falling under TSH 8408, 8409 and 8483 of Customs Tariff Act, 1975 as adopted to GST can be treated as 'parts of heading of 8902, 8904, 8905, 8906 and 8907' attracting 5% of IGST (2.5% CGST+ 2.5% SGST) as per Schedule I (Sr. No. 252) of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017 or not?
Facts
The applicant imports, assembles, and tests Marine Diesel Engines (TSH 8408), Gear Boxes (TSH 8483), and parts thereof (TSH 8409). These items are supplied to dealers and shipyard manufacturers for use in fishing vessels, ships, boats, and trawlers covered under Chapter 89 of the Customs Tariff Act, 1975. The applicant sought clarity on the classification and GST rate applicability, specifically whether these items qualify for the concessional 5% rate as parts of vessels.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification and GST rate of Marine Diesel Engines under TSH 8408 | Answered in the affirmative (classified under TSH 8408, attracting 28% IGST under Sr. No. 115, Schedule IV) General classification without considering end-use as vessel parts |
| Classification and GST rate of Gear Boxes under TSH 8483 | Answered in the affirmative (classified under TSH 8483, attracting 28% IGST under Sr. No. 135, Schedule IV) General classification without considering end-use as vessel parts |
| Treatment of items under TSH 8408, 8409, and 8483 as parts of Chapter 89 vessels attracting 5% GST | Answered in the affirmative (attracts 5% IGST under Sr. No. 252, Schedule I) Subject to the condition that the goods are used in specified Chapter 89 vessels; if used for other purposes, general TSH rate applies |
The AAR held that Marine Diesel Engines and Gear Boxes are generally classified under Chapter 84 attracting 28% GST under Schedule IV of Notification No. 01/2017-Central Tax (Rate). However, when supplied for actual use as **parts of vessels** falling under headings 8901, 8902, 8904, 8905, 8906, and 8907, they attract a **concessional GST rate of 5%** under Sr. No. 252 of Schedule I. This concessional rate applies only if the goods are used for eligible vessels and not diverted to other uses.
Reasoning
The AAR observed that Marine Diesel Engines and Gear Boxes are specifically listed under TSH 8408 and TSH 8483 respectively, which generally attract 28% GST under Schedule IV. However, Sr. No. 252 of Schedule I of Notification No. 01/2017-Central Tax (Rate) prescribes a 5% GST rate for parts of goods falling under Chapter 89 headings (8901, 8902, 8904, 8905, 8906, and 8907) falling under 'Any Chapter'. Based on General Rules for Interpretation of Customs Tariff and end-use considerations, engines and gearboxes supplied specifically as components for manufacture or repair of eligible marine vessels qualify under Sr. No. 252 of Schedule I. If the goods are diverted or used for purposes other than specified Chapter 89 vessels, the rate corresponding to their general tariff heading (28%) applies.
Provisions relied on
- TSH 8408, TSH 8409, TSH 8483 of the Customs Tariff Act, 1975
- Headings 8901, 8902, 8904, 8905, 8906, 8907 of the Customs Tariff Act, 1975
- Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 (Schedule I Sr. No. 252; Schedule IV Sr. Nos. 115, 135)
- Rule 3 of General Rules for the Interpretation of Customs Tariff
For the practitioner
This ruling establishes that general machinery components like marine engines and gearboxes classified under Chapter 84 can avail of the **concessional 5% GST rate** under Entry 252 of Schedule I when supplied as parts of Chapter 89 vessels. Tax practitioners can advise marine equipment suppliers to maintain **strict end-use documentation** proving integration into eligible vessels to defend the 5% tax position against general 28% GST demands.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/mah_aar_44_2017-18_b-51_15.06.2018_shiipl.pdf
Legibility of the scan, as read: high.
Prepared 19-10-2026.
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