The Authority ruled that a complete set of e-rickshaw components supplied as a single identifiable CKD kit attracts 5% GST under HSN 87038040, but prescribed four conditions whose breach results in classification as individual parts at 18%.
The Authority for Advance Rulings, West Bengal, has ruled that the supply of a complete set of components of a battery-operated electric three-wheeler (e-rickshaw) in Completely Knocked Down form to authorised dealers or assemblers is classifiable as a finished vehicle under HSN 87038040 at 5% GST, and not as individual parts attracting 18%, provided four cumulative conditions are satisfied [In Re: M/s. Bandhan Electric Vehicles LLP].
The applicant, a manufacturer of battery-operated e-rickshaws, supplied complete vehicles in CKD condition to its authorised dealers and assemblers under a single invoice at a composite price in a single consignment. The question before the AAR was whether such a supply should be treated as the supply of a finished vehicle attracting the concessional 5% rate or as a supply of individual parts attracting the higher rate.
The Authority, comprising Yogesh Sugdeo Chitte and Jaydip Kumar Chakrabarti, ruled in favour of classification as a finished vehicle but prescribed a four-condition test that must be cumulatively satisfied. First, all components necessary for assembly must be supplied together as a single identifiable kit. Second, the kit must constitute a complete CKD requiring only assembly without the addition of any essential component by the buyer. Third, commercial records — invoices, delivery challans, and contractual documents — must consistently describe the transaction as supply of an e-rickshaw in CKD condition. Fourth, the actual contents of the consignment must physically correspond with the commercial records. The Authority clarified that failure of any one of these conditions would result in the supply being classified as a set of individual parts at the applicable higher rate.
The ruling draws on the West Bengal Appellate AAR's established framework for CKD classification and provides a practical checklist for manufacturers across the electric vehicle industry who supply vehicles in knocked-down condition. The emphasis on physical correspondence between commercial records and actual consignment contents — the fourth condition — is a safeguard against misclassification, and manufacturers would do well to ensure that packing lists, invoices and delivery challans are meticulously aligned with the actual kit contents to avoid reclassification risk.
