The Delhi High Court is currently examining a key issue: whether roof-mounted air conditioning units (RMPUs) specifically designed for Indian Railways should be taxed at 18% or 28% under the Goods and Services Tax (GST) regime.
A bench of Justices Prathiba M. Singh and Rajneesh Kumar Gupta is hearing a petition filed by Stesalit Limited, a company engaged in railway and aerospace technology. The company has challenged Circular No. 235/2024 issued by the Ministry of Finance on October 11, 2024.
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This circular classified RMPUs under HSN code 8415, attracting 28% GST, instead of HSN code 8607, which draws only 18% GST.
“Machines and apparatus of heading 8415, which include air conditioning machines, are excluded from the ambit of ‘parts’ under Chapter 86,” the circular stated.
Stesalit Limited argues that this classification change is unjustified. Their counsel submitted that the company has always treated RMPUs under HSN 8607, based on which it has made agreements and fulfilled tax obligations.
“If implemented, this sudden change will severely disrupt the petitioner’s business operations,” their counsel emphasized.
The company also contends that the circular goes beyond its jurisdiction by removing the adjudicating authority’s power to decide the correct classification.
Adding to its argument, the petitioner cited three advance rulings—from Uttar Pradesh, Madhya Pradesh, and Himachal Pradesh—that previously classified RMPUs under HSN 8607.
“The classification of the ‘Roof Mounted AC Package Unit’, manufactured as per specific railway design and supplied only to Indian Railways, falls under Chapter 86.07 of the GST Tariff,” stated the Himachal Pradesh ruling dated April 11, 2022.
Acknowledging these concerns, the Delhi High Court has directed that no coercive action be taken against the petitioner while the case is ongoing. The petitioner has also received a show-cause notice from the GST department, which it plans to respond to within the extended 30-day deadline granted by the Court.
“The final order shall not be given effect without further orders of this Court,” said the bench while listing the matter for further hearing on May 9, 2025.
The outcome of this case will clarify the GST treatment for specialized railway equipment and may have significant implications for the railway supply chain across India.
Appearance: Mr. Balbir Singh, Sr. Adv. with Mr. Divyakant Lahoti, Ms. Praveena Bisht, Mr. Siddharth Tripathi, Mr. Karan Sachdeva & Ms. Shivali Shah, Advs for Petitioner; Mr. Aditya Singla, SSC with Mr. Umang Misra, Adv for Respondent
Case title: Ms Stesalit Limited & Anr v. Union Of India & Ors.
Case no.: W.P.(C) 3138/2025
