GST Tariff Classification - General Rules Of Interpretation (GIR)

If classification is not possible based on description of goods specified under tariff headings, chapter and section notes, then taxpayer has to follow the Rules of classifications.

Rules of classification is universal, since Harmonized System of Nomenclature and the Rules of classification of goods goes side by side. Since it is not possible to specify every entry of goods with its descriptions and description of goods are localized based on common parlance or market parlance, the need of classification Rules becomes important;. It provides a mechanism, which helps taxpayer to classify their product under suitable heading, sub-heading of the Tariff.

There are six General Rules used in interpreting the Tariff classification. These are known as the General Rules of Interpretation (GIR). Rules one to four are related and must be applied in sequence. Rules five and six stand on their own to be applied as and when needed.

Rule 1

The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions [e.g. GIRs 2 to 6):

Explanation: This is the first Rule to be considered in classifying any product. Most products are classified according to this rule. For practical purposes however, it may be broken into 2 parts:

(a)        The words iii the Section and Chapter titles are to be used as guidelines ONLY to point the way to the area of the Tariff in which the product to be classified is likely to be found. Articles may be included in or excluded from a Section or Chapter even though the titles might lead one to believe otherwise.

(b)       Classification is determined by the words (terms) in the Headings (the first four numbers) and the Section and Chapter Notes that apply to them unless the terms of the heading and the notes say otherwise. In other words, if the goods to be classified are covered by the words in a heading and the Section and Chapter Notes do not exclude classification in that heading, the heading applies.

So find a Heading that is worded in such a way as to include the product in question. And carefully check the Section and Chapter notes to see if the product is mentioned specifically as being included or excluded.

Many goods should be correctly classifiable by reference to Rule 1 alone.
If the results of this process are ambiguous and t,wo or more Headings appear to be applicable, then Rule 3 should be applied. When you read Rule 2 you will see why it would not be next Rule in such cases.

Example: If you are supplying Christmas tree candles, it would seem logical to classify them with Classification Number 9505.10.00.90: Other, articles for Christmas festivities. However, when reading the Notes to Chapter 95, it clearly states this Chapter does not cover Christmas tree candles. In fact, we must classify them with the Classification Number 3406.00.00.00: Candles, tapers and the like.

Rule 2:

Classification of incomplete, unfinished goods

(a)        Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or failing to be classified as complete or finished by virtue of this Rule), presented unassembled or disassembled.

(b)       Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3.

Explanation: Rule 2(a) deals with the classification of unfinished, incomplete, unassembled or disassembled goods. Unfinished and incomplete goods can be classified under the same Heading as the same goods in a finished state provided that they have the essential character of the complete or finished article. As well, unassembled or disassembled goods may also be classified the same as the complete finished product. This rule does not apply if the text of the Heading or the relevant Legal Notes exclude the unfinished or unassembled product in question.

Example: An automobile missing only its wheels would be classified the same as if it were complete.

Explanation: Rule 2(b) lays the ground work for dealing with products, not classifiable through the use of Rule 1 or Rule 2(a), which are composed of a mixture of materials or substances. It basically states that a Heading referring to a given material or substance includes mixtures of that substance with others. Similarly, a reference to a product composed of a given material or substance includes products composed either wholly or partly of the material or substance. This means that a mixed product may seem to be eligible for classification under two or more Headings. However, a given product can legally only be classified under one Heading. Rule 3 must be used to decide between alternate Headings.

Example: If you were importing dicalcium citrate, the Tariff does not specifically state this compound. However, it is a compound containing more than one material and its essential character is that of a salt of citric acid. Therefore, dicalcium citrate qualifies as Classification Number 2918.15.90.19: Salts and esters of citric acid, other.

Rule 3:

If goods are prima facie classifiable under two or more headings:

When by application of Rule 2(b) or for any other reason, goods a’e, prima facie, classifiable under two or more headings, classification shall be effected as follows:

(a)       The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

(b)       Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

(c)        When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

Explanation: Rule 3(a) states that where 2 or more Headings seem to apply, the one which provides the most specific description of the product in question should be used. This means that a Heading which names the actual product should be used in preference to one which only names a category to which the product could belong. Similarly, a Heading that describes the whole product should be used in preference to one which describes part of it. However, where two Headings both only describe part of the product, this rule cannot be used to tell which one to use even if one seems more specific or detailed than the other.

Example: Mint tea is not stated specifically, as a product, in the Tariff. Although the product descriptions available are mint and tea, the importer must classify mint tea under the appropriate tea Heading of tea because it provides the most specific product description and mint is only the flavour of the tea.

Explanation: Rule 3(b) applies to mixtures, composite goods and sets that cannot be classified by use of the previous Rules. These should be classified as if they consisted of the material or component which gives them their essential character.
Example: An importer bringing in “liquor gift sets” (that include the bottle of liquor and glasses) must classify the goods under the appropriate liquor Heading. The essential character of the item is the liquor itself and not the glasses contained within the set.

Explanation: Rule 3(c) is for use in cases in which a good seems to fit in more than one Heading and the essential character cannot be determined. In this case, the product should be classified under the Heading which occurs last in numerical order.
Example: A gift set which includes socks (Heading number 6115) and ties (Heading number 6117) cannot be classified by the previous rule since neither item gives the gift set its essential character. The gift set must be classified under the Heading number for ties which is the Heading that occurs last in numerical order.

Rule 4:

The goods which can’t be classified in accordance with Rules 1, 2 and 3:

Goods which cannot be classified in accordance with the above Rules shall be classified under the heading appropriate to the goods to which they are most akin.

Explanation: This is a “last resort” rule, most often used with new products.

Rule 5:

Miscellaneous provisions of classification:

In addition to the foregoing provisions, the following Rules shall apply in respect of the goods referred to therein:

(a)       Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long- term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This Rule does not, however, apply to containers which give the whole its essential character;

(b)       Subject to the provisions of Rule 5(a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use.

Explanation: Rule 5 specifies how to classify containers. Rule 5(a) deals with containers which:

•          are shaped or fitted for the article they will contain,

•          are suitable for long-term use,

•          protect the article when not in use,

•          are of a kind normally sold with such articles,

•          are presented with the articles they are designed to contain.

Containers which have these characteristics can be classified with the products which they contain. However, in cases where the container gives the product its essential character, it would be the container which would have to be classified.

Example: Rule 5(a) would apply to flute cases because flutes are normally sold with their cases (due to their specific shape) and are intended for long term use.

Explanation: Rule 5(b) deals with other types of containers and packing materials. These should be classified with the goods they contain if they are of a kind normally used for packing such goods and are not suitable for repetitive use.

Example: An importer bringing in goods and using Styrofoam chips for padding fits well into Rule 5(b). Styrofoam chips are normally used for the padding and insulation of many goods, however they are rarely reused and are therefore classified with the goods when they enter Canada.

For legal purposes, the classification of goods in the sub-headings of a heading shall be determined according to the terms of those sub-headings and any related Sub-heading Notes and mutatis mutandis, to the above Rules, on the understanding that only sub-headings at the same level are comparable. For the purpose of this Rule the relative section and Chapter Notes also apply, unless the context otherwise requires.

Explanation: Once goods have been classified to the Heading level by the use of international Rules 1 to 5, then classification to the Sub-heading level can now take place by repeating international Rules 1 to 5 and taking into account any related Legal Notes.

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