Transfer of capital goods between job-workers constitutes a taxable supply under GST regulations.

The Authority for Advance Ruling (AAR) determined that the transfer of machines and moulds (capital goods) from one job-worker to another constitutes a "supply" under GST. The ruling was based on the applicant's failure to comply with the provisions of the erstwhile Cenvat Credit Rules, 2004, and the lack of evidence of transitioning the capital goods into the GST regime through FORM GST TRAN-1. As a result, GST is deemed payable on such transfers.

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Issues Involved:
1. Whether the transfer of machines and moulds (capital goods) from one job-worker to another constitutes a "supply" under GST.

Issue-Wise Detailed Analysis:

1. Background and Facts:
The applicant, Silgan Dispensing Systems India Pvt. Ltd., sought an advance ruling on whether the transfer of machines and moulds (capital goods) from one job-worker to another under the GST regime constitutes a "supply." Initially, these capital goods were transferred to M/s. Shaily Engineering Plastics Limited by M/s. MWV India Pvt. Ltd. under the erstwhile Central Excise Act, 1944. Subsequently, the business, including the capital goods, was transferred to Aphrodite Packaging Solutions Pvt. Ltd., which later became Silgan Dispensing Systems India Pvt. Ltd. The applicant now intends to transfer these goods to another job-worker, M/s. Vasanth Tools Crafts Pvt. Ltd.

2. Applicant's Contentions:
The applicant argued that Section 141 of the CGST Act, 2017, which deals with transitional provisions, only applies to inputs and not capital goods. They contended that there is no specific provision under the transitional provisions for capital goods, and thus, the transfer should not entail any GST liability. They also referenced several case laws and CGST Circular No. 38/12/2018 dated 26.03.2018, which allows the movement of goods from one job-worker to another under a challan without GST.

3. Department's Contentions:
The department highlighted that the Cenvat Credit Rules, 2004, required capital goods to be received back within two years, failing which the manufacturer must pay an amount equivalent to the CENVAT credit. Since the capital goods were not received back within the stipulated time and no duty was paid, the transfer of these goods under GST would constitute a "supply." They also questioned whether the applicant or the original principal manufacturer had included these goods in their TRAN-1 forms under the GST regime.

4. Findings:
The Authority for Advance Ruling (AAR) noted that the applicant had contravened the provisions of the erstwhile Cenvat Credit Rules, 2004, by not receiving the goods back within the stipulated time and not reversing the credit. The AAR also observed that the applicant did not provide evidence of carrying forward the capital goods into the GST regime through FORM GST TRAN-1. Consequently, the transfer of these goods from one job-worker to another would be treated as a fresh transaction and constitute a "supply" under GST.

5. Conclusion:
The AAR concluded that the transfer of machines and moulds (capital goods) from the premises of one job-worker to another, originally received under the erstwhile Central Excise Act, 1944, constitutes a "supply" under GST. Therefore, GST is payable on such transfers.

Order:
The question of whether the transfer of machines and moulds (capital goods) from the premises of one job-worker to another constitutes a "supply" under GST was answered in the affirmative.

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