Coating services on customer-supplied goods qualify as job work under section 2(68), attracting 12% GST rate

AAR Maharashtra ruled that coating services performed on customer-supplied goods constitute job work under section 2(68) of CGST Act, 2017. The applicant processes goods supplied by principals under challan, returns them after coating without creating new products with distinct name, character or use. Since no new product emerges and title remains with principals, the activity qualifies as job work services under residuary entry (id) of Notification 11/2017, attracting 12% GST rate rather than 18%.

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Issues Involved:
1. Qualification of activities as job work under section 2(68) of the CGST Act, 2017.
2. Applicable GST rate: 12% or 18% as per Notification No. 11/2017 CT-Rate dated 28 June 2017, amended by Notification No. 20/2019 CT-Rate dated 30 Sep 2019.
3. Classification of services and applicable tax rate if not considered job work.

Detailed Analysis:

Issue 1: Qualification as Job Work
The applicant, engaged in coating activities on goods belonging to customers, sought clarification on whether their activities qualify as job work under section 2(68) of the CGST Act, 2017. The definition of job work is any treatment or process undertaken by a person on goods belonging to another registered person. The applicant argued that since they apply coatings on goods received from customers and return them after processing, their activities fall under job work. The authority agreed, noting that the process does not result in a new product with a distinct name, character, and use, thus confirming the activities as job work.

Issue 2: Applicable GST Rate
The applicant inquired about the applicable GST rate, whether 12% or 18%, under Notification No. 11/2017 CT-Rate as amended. The notification differentiates between job work services and manufacturing services on physical inputs owned by others. The applicant contended that their services should attract a 12% GST rate under entry (id) for job work services. The authority examined the relevant provisions and concluded that the applicant's services qualify as job work under entry (id), attracting a 12% GST rate. The authority referenced the GST Council's clarification and the Supreme Court's ruling in Maruti Suzuki Limited Vs. CCE, which distinguished between processing and manufacturing, supporting the 12% GST rate for job work.

Issue 3: Classification and Tax Rate if Not Job Work
Given the affirmative answer to the first issue, the third question regarding classification and tax rate if the activities were not considered job work was not addressed.

Conclusion:
The authority ruled that the applicant's activities qualify as job work under section 2(68) of the CGST Act, 2017, and the applicable GST rate is 12% under Sr. No. 26 (id) of Notification No. 11/2017 CT-Rate as amended by Notification No. 20/2019 CT-Rate. The third question was not answered due to the affirmative ruling on the first two issues.

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