2021 (2) TMI 869 - AAR - GST

Classification of Thermal Spray Services for GST

The authority classified the applicant's thermal spray or metal coating services as job work under SAC 998873, subject to GST rates based on the ... Job Work - Classification of Supply - rate of GST - coatings of pure metal alloys which include plasma spray, HVOF spray, powder flame spray, wire flame spray - Applicability of N/N. 20/2019-Central Tax (Rate) dated 30.09.2019 - HELD THAT:- Section 2(68) of CGST Act, 2017 defines job work as, “any treatment or process undertaken by a person on goods belonging to another registered person”. Further Schedule II, in relation to Section 7 of the CGST Act 2017, prescribes the activities or transactions to be treated as supply of goods or supply of services. Clause 3 of the said Schedule II prescribes that “any treatment or process which is applied to another person’s goods is a supply of services” - In the instant case the applicant undertakes thermal spray / metal or metal alloy coating on the goods / material belonging to another person i.e. the principal. Therefore the work undertaken by the applicant amounts to job work and is a supply of services. Classification of the job work being provided by the applicant - HELD THAT:- It is an admitted fact that the job-work being provided by the applicant is nothing but metal coating of the goods belonging to other persons in different methods i.e. thermal spray, plasma spray, HVOF spray, Powder flame spray & wore flame spray. The Explanatory Notes to the Scheme of Classification of Services specifies that SAC 9988 covers Manufacturing services on physical inputs owned by others and SAC 998873 covers Other fabricated metal product manufacturing and metal treatment services which includes metal treatment and coating services, general machining services, cutlery, hand tool and general hardware manufacturing services and other fabricated metal product manufacturing services not elsewhere covered. In the instant case the applicant’s services are indubitable metal treatment/coating services and hence merit classification under SAC 998873. The Notification No. 20/2019-Cental Tax (Rate) dated 30.09.2019 specifies the rate for job work in relation to diamonds, bus body building and all other rest of the items - Circular No. 126/45/2019-GST dated 22.11.2019 clarifies on scope of the notification entry at item (id), related to job work, under heading 9988 of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, at para 4 has been issued, which stipulates that entry at item (iv) covers only such services which are carried out on physical inputs (goods) which are owned by persons other than those registered under the CGST. The applicant, in the instant case has not furnished required information so as to decide whether the goods received by them for job work belong to an unregistered person or not. Thus the job work undertaken by the applicant gets covered under item (id) of SL.No.26 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 in case the owner of the goods (Principal) is registered under CGST and attract GST @ 12% and if the principal is unregistered the impugned job work gets covered under item (iv) of SL.No.26 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 and attracts GST @ 18%. Issues:Classification of service as job work under CGST Act, 2017 and KGST Act, 2017.Analysis:The applicant, engaged in thermal spray or metal coating services, sought an advance ruling to determine if their activity qualifies as job work under Section 2(68) of the CGST Act, 2017. They provide various coatings using metal powders, carbide powders, and wires rods for engineering applications. The process involves receiving material from clients, performing the required job, and returning the material. The applicant uses consumables that contribute significantly to the service cost. They applied for the ruling under Section 97(2)(a) of the CGST Act, which was admitted based on the issues raised.During the personal hearing, the applicant's authorized representative reiterated the facts. The authority considered the submissions and relevant provisions of the CGST and KGST Acts. The applicant's service involves applying thermal spray or metal coating on materials provided by the client, making it a supply of services. The nature of the services provided, including various coatings and processes, was thoroughly examined.The authority clarified that job work involves any treatment or process on goods belonging to another registered person. The applicant's services fell under this definition as they coat materials belonging to the principal. The classification of the job work was determined to be under SAC 998873, covering metal treatment and coating services. The applicable GST rate depended on whether the principal was registered under the CGST/KGST Act, with rates of 12% or 18% specified based on the registration status.In conclusion, the authority ruled that the applicant's activity constitutes job work under SAC 998873, with the applicable GST rate determined by the registration status of the principal. The ruling provided clarity on the classification and taxation of the services provided by the applicant, ensuring compliance with the CGST and KGST Acts.