Body building work on chassis provided by principal constitutes job work services taxable at 18% GST rate

The AAAR held that job work involving body building on chassis provided by the principal constitutes services taxable at 18% GST rate. The appellant received chassis free of cost under delivery challans for temporary possession to perform fabrication work, with ownership remaining with the principal. The authority clarified that procuring inputs like steel sheets and windows for fabrication work does not constitute manufacturing. Applying CBIC Circular No. 52/26/2018-GST, the body building and mounting work on tippers, tankers, trucks and trailers qualifies as job work services subject to 18% GST rate under the specified notification conditions.

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Issues:
1. Interpretation of whether body building activity on the chassis provided by the principal amounts to manufacturing services attracting 18% GST.
2. Clarification on the applicability of the CBIC circular regarding the GST rate in the case of the applicant.

Analysis:
1. The appeal was filed against the Advance Ruling Order that concluded the body building activity on the chassis did not amount to manufacturing services attracting 18% GST. The appellant argued that the process constituted job work as defined in Section 2(68) of the CGST Act, 2017, and ownership of the chassis remained with the principal. They referenced Circular No. 38/12/2018 to support their claim that job workers can use inputs for fabrication without it being considered as manufacture. The appellant's submission emphasized the temporary possession of the chassis for job work, maintaining the principal's ownership.

2. The discussion highlighted the process of body building involving fabrication, assembly, mounting, and finishing. The definition of "manufacture" under Section 2(72) was contrasted with job work under Section 2(68) to distinguish the nature of the activity. The judgment referenced Circular No. 52/26/2018-GST and Notification No. 11/2017 to address the applicable tax rates for such services. It was concluded that the body building and mounting activity on chassis supplied by the principal, subject to certain conditions, should be taxed at 18% as per the circular, not as manufacturing.

Conclusion:
The appellate authority ruled in favor of the appellant, determining that the body building activity on chassis for various vehicles constitutes taxable services at 18% GST rate. The judgment clarified the distinction between manufacturing and job work, emphasizing the temporary possession of chassis for fabrication purposes. The decision aligned with Circular No. 52/26/2018-GST and relevant notifications, providing a comprehensive analysis of the issues raised in the appeal.

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