2018 (12) TMI 843 - AAR - GST

GST Applicability on Job Work Services for Brewing Beer by Privilege Industries Limited

In Re: M/s. Crown Beers India Private Limited

In Re: M/s. Crown Beers India Private Limited - 2019 (21) G.S.T.L. 93 (A. A. R. - GST), [2019] 67 G S.T.R. 102 (AAR) Issues Involved:1. Applicability of CGST/MGST/IGST on consideration paid for the supply of alcoholic liquor for human consumption.2. Rate of CGST/UTGST/IGST if the supply of beer is considered a service by way of job work.Detailed Analysis:Issue 1: Applicability of CGST/MGST/IGST on Consideration Paid for the Supply of Alcoholic Liquor for Human ConsumptionApplicant's Contention:The applicant, Crown Beers India Private Limited, argues that the supply of alcoholic liquor for human consumption is explicitly excluded from the ambit of CGST, MGST, and IGST as per the Constitution of India and respective GST Acts. They cite Article 366 (12A) of the Constitution, Section 9(1) of the CGST Act/MGST Act, and Section 5(1) of the IGST Act, which exclude the supply of alcoholic liquor for human consumption from GST. They assert that the fixed fee paid to Privilege Industries Limited (PIL) for brewing, manufacturing, packaging, and supplying beer should not attract GST.Authority's Observations:The Authority for Advance Ruling (AAR) noted that the costs paid by the applicant to PIL for purchasing materials, arranging labor, and other facilities are not considered a supply of goods/services under GST law. However, the fixed fee paid to PIL is for job work services, which constitutes a supply of service. The AAR concluded that the fixed fee paid to PIL for job work services is liable to GST, while the costs incurred for purchasing materials are not taxable under GST.Conclusion:The fixed fee received by PIL for job work services is subject to GST, but the costs incurred for purchasing materials are not.Issue 2: Rate of CGST/UTGST/IGST if the Supply of Beer is Considered a Service by Way of Job WorkApplicant's Contention:The applicant argues that if the supply of beer is considered a service by way of job work, it should fall under the category of 'manufacturing services on physical inputs owned by others' and be taxed accordingly. They refer to Notification No. 11/2017-Central Tax (Rate) and its amendments, which prescribe a 2.5% CGST rate for job work services related to food products, including beer.Authority's Observations:The AAR clarified that the supply of beer itself is not a service. The taxable service in this case is the job work performed by PIL, which involves brewing, manufacturing, packaging, and supplying beer. The AAR agreed with the applicant's interpretation that job work services related to beer should be taxed at the rate specified for job work on food products, which is 2.5% CGST and 2.5% MGST for intra-state supplies, and 5% IGST for inter-state supplies.Conclusion:The job work services provided by PIL for brewing, manufacturing, packaging, and supplying beer are taxable at the rate of 2.5% CGST and 2.5% MGST for intra-state supplies, and 5% IGST for inter-state supplies.Order:1. Question 1: The taxes have to be discharged by PIL on the fixed fee received for job work services, not on the costs incurred for purchasing materials.2. Question 2: The job work services provided by PIL are taxable at the rate of 2.5% CGST and 2.5% MGST for intra-state supplies, and 5% IGST for inter-state supplies.