Body building activity on chassis not manufacturing service under 18% GST

The body building activity on the chassis provided by the principal was determined not to constitute manufacturing services attracting 18% GST. Additionally, the CBIC Circular No. 52/26/2018-GST dated 09.08.2018 was found not to apply to the applicant's case. The ruling, issued by the Authority for Advance Ruling Uttar Pradesh, categorizes the activity as a supply of goods subject to 28% GST, based on the applicant procuring all materials necessary for the body building process.

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Issues Involved:
1. Classification of the body building activity on the chassis provided by the principal.
2. Applicability of CBIC Circular No. 52/26/2018-GST dated 09.08.2018 to the applicant's case.

Detailed Analysis:

Issue 1: Classification of the Body Building Activity on the Chassis Provided by the Principal

The applicant, engaged in the body building and mounting of bodies on chassis of Tippers, Tankers, Trucks, and Trailers, sought clarification on whether such activity would amount to manufacturing services attracting 18% GST. The applicant argued that their activity involves significant fabrication and assembly processes, and referenced CBIC Circular No. 52/26/2018-GST, which clarifies that bus body building on a chassis provided by the principal is classified as a service attracting 18% GST.

The Authority examined the nature of the applicant’s activities, noting that the applicant procures all materials required for the body building from its own account, and only the chassis is provided by the principal. The Authority referenced Section 2(68) of the CGST Act, 2017, which defines "job work" as any treatment or process undertaken by a person on goods belonging to another registered person. Given that the applicant purchases all materials and only receives the chassis, the activity does not qualify as job work.

Furthermore, the Authority referred to Section 2(72) of the CGST Act, 2017, which defines "manufacture" as processing raw materials or inputs resulting in a new product with a distinct name, character, and use. The body building activity on the chassis amounts to the manufacture of a motor vehicle, as per Chapter note 6 of Chapter 87 of the Central Excise Tariff Act, 1985.

Thus, the Authority concluded that the applicant’s activity is not classified as manufacturing services but as a supply of goods, attracting 28% GST.

Ruling on Issue 1: The body building activity on the chassis provided by the principal does not amount to manufacturing services attracting 18% GST.

Issue 2: Applicability of CBIC Circular No. 52/26/2018-GST Dated 09.08.2018

The applicant also sought clarification on whether the CBIC Circular No. 52/26/2018-GST, which specifies an 18% GST rate for bus body building on a chassis provided by the principal, applies to their case. The Circular differentiates between two scenarios: (a) where the bus body builder supplies the built-up bus to the customer, attracting 28% GST, and (b) where the body is built on a chassis provided by the principal, attracting 18% GST as a service.

The Authority noted that the Circular’s clarification applies to cases where the body builder only charges for fabrication, including certain materials consumed during the process. In the applicant’s case, the dominant character of the work is the supply of goods rather than services, as the applicant procures all materials required for the body building. The transaction involves the supply of the vehicle body, not merely a service.

Additionally, the Authority referenced CBIC Circular No. 34/8/2018-GST, which clarifies that the classification of bus body building as a supply of goods or services depends on the principal supply. In the applicant’s case, the principal supply is the body of the vehicle, making it a composite supply with the principal supply being the supply of goods.

Ruling on Issue 2: The CBIC Circular No. 52/26/2018-GST dated 09.08.2018 does not apply to the applicant’s case.

Conclusion:
The Authority for Advance Ruling concluded that the body building activity on the chassis provided by the principal does not amount to manufacturing services attracting 18% GST, and the clarification of CBIC Circular No. 52/26/2018-GST dated 09.08.2018 does not apply to the applicant’s case. The ruling is valid within the jurisdiction of the Authority for Advance Ruling Uttar Pradesh and subject to the provisions under Section 103(2) of the CGST Act, 2017 until declared void under Section 104(1) of the Act.

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