NEW DELHI: The Goods and Services Tax ( GST ) authorities have sent show cause-cum-demand notices to over a dozen companies providing CNG cylinders to motor vehicles , alleging misclassification of such fuel tanks.

ET Year-end Special Reads Corporate Kalesh: Top family disputes of India Inc in 2024 The world of business lost these eminent people in 2024 Fast, faster, fastest: How 2024 put more speed into your shopping The notices, sent between September and November, allege that companies wrongly classified CNG fuel tanks as general cylinders for compressed gas and paid 18% GST, despite these cylinders being exclusively used in motor vehicles.

The authorities have sought unpaid tax from July 2017 to April 2024, with interest and penalty.

Industry says this could have huge tax implications.

The authorities argue that CNG fuel tanks are integral to vehicles, similar to petrol or diesel tanks, and cannot be interchanged with other cylinders and therefore liable to 28% GST. "The CNG kits are basically an auto part and different from an empty CNG fuel tank," a senior official told ET. Artificial Intelligence(AI) Learn InVideo AI: Create Videos from Text Easily By - Prince Patni, Software Developer (BI, Data Science) View Program Finance AI and Generative AI for Finance By - Hariom Tatsat, Vice President- Quantitative Analytics at Barclays View Program Strategy Succession Planning Masterclass By - Nigel Penny, Global Strategy Advisor: NSP Strategy Facilitation Ltd. View Program Data Science SQL for Data Science along with Data Analytics and Data Visualization By - Metla Sudha Sekhar, IT Specialist and Developer View Program Artificial Intelligence(AI) Mastering C++ Fundamentals with Generative AI: A Hands-On By - Metla Sudha Sekhar, IT Specialist and Developer View Program Office Productivity Microsoft Word Mastery: From Beginner to Expert By - CA Raj K Agrawal, Chartered Accountant View Program Artificial Intelligence(AI) AI and Analytics based Business Strategy By - Tanusree De, Managing Director- Accenture Technology Lead, Trustworthy AI Center of Excellence: ATCI View Program Office Productivity Mastering Google Sheets: Unleash the Power of Excel and Advance Analysis By - Metla Sudha Sekhar, IT Specialist and Developer View Program Finance Financial Literacy i.e Lets Crack the Billionaire Code By - CA Rahul Gupta, CA with 10+ years of experience and Accounting Educator View Program Astrology Vastu Shastra Course By - Sachenkumar Rai, Vastu Shashtri View Program Artificial Intelligence(AI) AI for Everyone: Understanding and Applying the Basics on Artificial Intelligence By - Ritesh Vajariya, Generative AI Expert View Program Web Development 12-Factor App Methodology: Principles and Guidelines By - Prince Patni, Software Developer (BI, Data Science) View Program Web Development Java 21 Essentials for Beginners: Build Strong Programming Foundations By - Metla Sudha Sekhar, IT Specialist and Developer View Program Marketing Modern Marketing Masterclass by Seth Godin By - Seth Godin, Former dot com Business Executive and Best Selling Author View Program Web Development Intermediate C++ Skills: Master Pointers, Structures and File Stream By - Metla Sudha Sekhar, IT Specialist and Developer View Program Leadership Business Storytelling Masterclass By - Ameen Haque, Founder of Storywallahs View Program Marketing Future of Marketing & Branding Masterclass By - Dr. David Aaker, Professor Emeritus at the Haas School of Business, UC Berkeley, Author | Speaker | Thought Leader | Branding Consultant View Program Web Development Intermediate Java Mastery: Method, Collections, and Beyond By - Metla Sudha Sekhar, IT Specialist and Developer View Program Data Analysis Learn Power BI with Microsoft Fabric: Complete Course By - Prince Patni, Software Developer (BI, Data Science) View Program Artificial Intelligence(AI) Master in Python Language Quickly Using the ChatGPT Open AI By - Metla Sudha Sekhar, IT Specialist and Developer View Program The official said these were different from CNG conversion kits as these kits in toto help motor vehicles designed to run on fuels like petrol and diesel run on CNG, providing an alternate fuel charging system to the one existing in the engine.

Industry, however, maintains the tax rate paid was based on consultations and purchase orders from top auto clients, which specified 18% GST. The show cause-cum-demand notices reference contraventions under various sections of the Central GST Act, 2017, and seek penalties, interest and adjustments for misdeclared payments.

The companies have been given 30 days to respond and present their defence, failing which an ex parte adjudication may occur.

Legal experts say CNG fuel tanks are not inherently motor vehicle parts under HSN code 8708 (28% GST) unless explicitly defined as such.

"As GST laws provide no clear distinction between standalone gas cylinders and those used in vehicles, in cases of ambiguity, judicial precedents favour the taxpayer's interpretation," said Abhishek Rastogi, founder of Rastogi Chambers . The dispute essentially is whether CNG cylinders should be classified under Chapter 87 as parts of motor vehicles or under a specific description as part of Chapter 73," said Pratik Jain, partner-indirect tax, PwC . He said the GST Council should ideally issue a clarification in the matter to avoid prolonged litigations.

"A definitive clarification from the Central Board of Indirect Taxes and Customs ( CBIC ) regarding the applicable tax rate would offer much-needed certainty to the industry," said Saurabh Agarwal, tax partner, EY. Nominations for ET MSME Awards are now open.

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