2018 (10) TMI 1044 - AAR - GST

Building & mounting body on chassis classified as service under GST. Job work provisions apply.

The Advance Ruling Authority determined that the activity of building and mounting the body on the chassis provided by the principal under FOC challan ... Treatment or process applied to another person's goods - job work - classification of supply as goods or services - HSN 8707 vs HSN 9988 - applicability of 18% GST to fabrication as serviceTreatment or process applied to another person's goods - job work - classification of supply as goods or services - HSN 9988 - applicability of 18% GST to fabrication as service - Whether building and mounting of bus body on chassis supplied by the principal under FOC challan is a supply of service liable to GST under HSN 9988 at 18% - HELD THAT: - The chassis are owned by the principal and are sent to the applicant under FOC delivery challans. Sectional definitions treat any treatment or process undertaken on another person's goods as job work and Schedule II (para 3) specifies that such treatment or process is a supply of service. Reliance on the principle in Prestige Engineering that additions by a job worker do not alter the character of the principal's goods supports treating the activity as service where the principal retains ownership of the chassis. The fact that the job worker uses some of its own inputs does not change the nature of the transaction into a supply of goods; GST law recognises inputs and intermediate goods without distinguishing raw, semi-finished or finished goods for this purpose. The Authority distinguished two situations: (a) where the body builder uses its own chassis and supplies a complete bus (a supply of goods, taxable at 28%); and (b) where the builder fabricates on chassis provided by the principal, charging fabrication/fabrication-plus-materials as job work (a supply of service). Applying these principles to the facts where the chassis remain the principal's property and are returned after body building, the activity is a supply of service under HSN 9988 and attracts 18% GST.Building and mounting of the body on chassis provided by the principal under FOC challan is a supply of service under HSN 9988 and is taxable at 18% GST.Final Conclusion: The Authority rules that where the chassis remain the property of the principal and are provided under FOC challan for fabrication, the applicant's activity of building and mounting the body is a job-work/service falling under HSN 9988 and attracts GST at 18%; distinct factual situations where the builder supplies a complete bus using its own chassis would be treated as supply of goods. Issues Involved:1. Determination of whether the activity of building and mounting the body on the chassis constitutes a supply of goods under HSN 8707 or a supply of services under HSN 9988.Analysis:The case involved a query regarding the classification of the activity of building and mounting the body on a chassis as either a supply of goods or a supply of services. The applicant, an automobile corporation, received chassis from OEMs on a Free of Cost (FOC) basis and carried out body building on the chassis using their own procured materials. The fully built vehicles were then sent back to the OEMs/customers after payment of GST. The central issue was whether this activity falls under HSN 8707 (goods) or HSN 9988 (services).The applicant contended that since they used their own inputs and the chassis ownership was not transferred, the activity should be classified as job work, which involves the use of both self-procured goods and goods received from the principal. However, the authority referred to the definition of job work under the CGST and SGST Act, which includes any treatment or process on goods belonging to another registered person. The authority also highlighted the provision that any treatment or process applied to another person's goods is considered a supply of service.The authority emphasized that the distinction between raw materials, finished goods, and semi-finished goods is not relevant under GST law, as it focuses on inputs and capital goods. The judgment cited a previous case to support the argument that the addition or application of items by a job worker does not change the nature of their work. Additionally, the authority clarified that if the bus body builder works on a chassis owned by them, it constitutes a supply of goods attracting 28% GST, while working on a chassis provided by the principal for body building is classified as a service with 18% GST.In conclusion, the Advance Ruling Authority determined that the activity of building and mounting the body on the chassis provided by the principal under FOC challan should be classified as a supply of services under HSN 9988, subject to 18% GST.This detailed analysis considered the legal provisions, previous judgments, and the specific circumstances of the case to arrive at a comprehensive decision regarding the classification of the activity in question.