AAR Gujarat rules fabricating tankers, tippers, bus bodies on customer chassis constitutes supply of services under Schedule II(3) CGST Act

AAR Gujarat ruled that fabricating and mounting tankers, tippers, and bus bodies on customer-owned chassis constitutes supply of services under Schedule II(3) CGST Act, as it involves treatment/process applied to another person's goods. For GST registered customers, this qualifies as job work under Section 2(68) CGST Act, falling under Sr. No. 26(ic) of Notification 11/2017-CT(R). For unregistered customers, it's classified as manufacturing services on physical inputs owned by others under Sr. No. 26(iv). The activity is classified under Heading 9988 with service code 998882 for transport equipment manufacturing services.

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Issues:
1. Classification of activity of fabricating and mounting Tankers, Tippers, etc. on chassis as supply of services.
2. Determination of applicable accounting code and GST rate for the mentioned services.

Analysis:
For the first issue, the applicant, M/s. Vasant Fabricators Pvt. Ltd. (VFPL), engaged in building bodies of various vehicles, argued that their activity of converting chassis into mounted Tankers, Tippers, etc. constitutes a supply of services. They based their argument on the Scheme of Classification of services under Notification No. 11/2017 Central Tax (Rate), specifically under the main head of 9988 for "Manufacturing services on physical inputs (goods) owned by others." VFPL differentiated the applicable rate of GST as 18% based on whether the chassis is provided by a registered or unregistered person. They supported their stance with relevant definitions and notifications, emphasizing the distinction between job work services and other manufacturing services based on the ownership of the goods.

Regarding the second issue, VFPL sought clarity on the accounting code and GST rate applicable to their services. They referenced Circular No. 126/45/2019-GST and various Advance Rulings to support their claim that their activity falls under the category of supply of services. The applicant highlighted the distinction between supply of goods and services in the context of bus body building, citing relevant clarifications and FAQs issued by the CBIC. Additionally, VFPL presented multiple Advance Rulings from different states to reinforce their argument that their activity should be classified under specific service codes related to motor vehicle and trailer manufacturing services.

During the personal hearing, the applicant reiterated their submissions, while the Revenue did not provide any comments or attend the hearing. The Authority for Advance Ruling examined the legal provisions, including Schedule II(3) of the CGST Act, which defines treatment or processes on another person's goods as a supply of service. The Authority concluded that bus body building on a customer-owned chassis constitutes a supply of service, with different GST rates applicable based on whether the customer is registered or unregistered under the CGST Act. The ruling specified the service description, notification, service code, and GST rate for both scenarios, affirming that the activity of fabricating and mounting Tankers, Tippers, etc. on chassis is indeed classified as a supply of services under the GST Scheme of law.

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