Contract brewing payments taxed as service consideration where brand owner provides supervision, know-how and brand-use rights.

Contract brewing was not treated as job work where the brewing units procured and accounted for raw materials on their own books, because GST job work requires processing of goods belonging to another registered person; GST was therefore not payable on the profit retained by those units. The amount transferred to the brand owner, however, was treated as consideration for supplying specifications, technical know-how, supervision and brand-use rights for manufacture and sale, so it fell within the wider meaning of supply and the residual service classification. GST was accordingly payable on that receipt, under Service Code 999799.

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Issues: (i) Whether beer manufactured by contract brewing units from materials procured and accounted by them amounted to supply of service to the brand owner, making GST payable on the profit retained by those units; (ii) Whether GST was payable by the brand owner on the surplus profit transferred by the contract brewing units.

Issue (i): Whether beer manufactured by contract brewing units from materials procured and accounted by them amounted to supply of service to the brand owner, making GST payable on the profit retained by those units.

Analysis: The arrangement showed that the contract brewing units procured the raw materials on their own account and accounted for them in their books. The activity therefore did not satisfy the statutory concept of job work, because the treatment or process contemplated under the GST law applies to goods belonging to another registered person. The manufacturing activity also did not fall within the relevant service classification under the GST rate notification, as the necessary element of the brand owner supplying goods for processing was absent.

Conclusion: The contract brewing units were not supplying service to the brand owner, and GST was not payable on the amount retained by them as profit.

Issue (ii): Whether GST was payable by the brand owner on the surplus profit transferred by the contract brewing units.

Analysis: The brand owner provided specifications, technical know-how, supervision, and the right to use the brands for manufacturing and sale of the beer. The amount received from the contract brewing units was held to be consideration for this service, and not merely a business surplus outside the tax net. The fact that the service was not covered by the specific intellectual property entry in Schedule II did not exclude it from the broader statutory meaning of supply, and it fell within the residual service classification under the GST rate notification.

Conclusion: GST was payable by the brand owner on the surplus profit received from the contract brewing units, and the service was classifiable under Service Code 999799.

Final Conclusion: The ruling denied GST liability on the contract brewing units' retained profit but upheld GST liability on the amount received by the brand owner from the brewing arrangement.

Ratio Decidendi: A payment flowing from a manufacturing arrangement is taxable as service consideration where the recipient provides specifications, supervision, and brand-use rights, even if the activity is not specifically described in Schedule II, while processing is not job work unless the goods processed belong to another registered person.

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