2019 (4) TMI 73 - AAR - GST

GST Taxable: Job Work Services for Rubber Compound Processing

The court ruled that mixing rubber compound on materials supplied by the principal and returning finished products constitute job work services under ... Job work - service by way of job work - manufacturing services on physical inputs owned by others - classification under Sl.No.26(i)(b) of Notification 11/2017 (Central Tax (Rate)) - GST rate 5% for textiles and textile products - value of job work services based on service chargeJob work - classification under Sl.No.26(i)(b) of Notification 11/2017 (Central Tax (Rate)) - GST rate 5% for textiles and textile products - Mixing of rubber compound on materials supplied by the principal and returning the finished products to the principal-whether this constitutes supply of job work services covered by Sl.No.26(i)(b) of Notification 11/2017 (Central Tax (Rate)) and SRO.No.370/2017. - HELD THAT: - The Authority applied the statutory definition of job work as any treatment or process undertaken by a person on goods belonging to another registered person and relied on the CBEC Circular clarifying that job workers may use their own goods but perform services on physical inputs owned by others. The process described-cutting supplied textile/coir materials, fusing them with molten rubber compound, vulcanising and returning finished rubber-backed mats to the principal-constitutes manufacturing services performed on inputs owned by the principal and therefore a job work service. The materials supplied by the principal fall within Chapters 50 to 63 of the First Schedule to the Customs Tariff Act; textiles and textile products and coir articles attract the rate of 5% GST. Consequently, job work services applied to such goods fall within the scope of Sl.No.26(i)(b) of Notification 11/2017 (Central Tax (Rate)) and SRO.No.370/2017 and are taxable at the prescribed rate.The described activities constitute supply of job work services and are covered by Sl.No.26(i)(b) of Notification 11/2017 (Central Tax (Rate)) and SRO.No.370/2017.Final Conclusion: The Authority ruled that mixing rubber compound on materials supplied by the principal and returning finished rubber-backed mats is a job work service and falls under Sl.No.26(i)(b) of Notification 11/2017 (Central Tax (Rate)) and SRO.No.370/2017, attracting the applicable rate provided therein. Issues Involved: Advance ruling on whether mixing rubber compound on materials supplied by principal and returning finished products to the principal falls under Sl.No.26(i)(b) of Notification 11/2017-(Central Tax (Rate)) and SRO.No.370/2017.The judgment analyzed the petitioner's activities as a manufacturer and supplier of rubber-backed mats and mattings, including job work where materials are supplied by the principal. The process involves cutting materials to size, mixing with molten rubber compound, and vulcanizing with a hydraulic press before delivering the finished products to the principal. The petitioner sought clarification on whether these activities fall under Sl.No.26(i)(b) of Notification 11/2017. The authorized representative argued that job work services on goods owned by others are considered services under SAC 9988, and the goods supplied by the principal are taxable at 5% GST under specific HSN codes. The Circular No.38/12/2018 clarified that job workers can use their goods in addition to those received from the principal, and the value of services is based on service charges, not the value of goods manufactured. The ruling considered that job work involves treating or processing goods owned by another registered person, and the job worker is liable to pay GST if registered, issuing invoices at the time of service supply.The judgment further elaborated that the materials supplied for job work fall under specific chapters in the Customs Tariff Act, and since all raw materials provided by the principal are covered under these chapters, the job work services applied to such goods fall under Sl.No.26(i)(b) of Notification 11/2017, taxable at 5% GST. Consequently, the ruling concluded that mixing rubber compound on materials supplied by the principal and returning finished products like rubber-backed mats and mattings constitute the supply of job work services falling under the specified notification and rate.In conclusion, the judgment clarified that the activities of mixing rubber compound on materials supplied by the principal and returning finished products to the principal are considered job work services under the relevant notification and are taxable at 5% GST. The ruling emphasized the importance of understanding job work processes, the liability for GST payment, and the invoicing requirements for job work services provided by the petitioner in this case.