Fabricating tankers/tippers on customer-provided chassis classified as manufacturing service under SAC 998882, attracts 18% GST

AAR Gujarat ruled that fabricating and mounting tankers/tippers on chassis provided by owners constitutes supply of service, not composite supply. The activity is classified under SAC 998882 (Other transport equipment manufacturing services) and attracts 18% GST regardless of whether the chassis owner is registered or unregistered. The ruling relied on Government Circular No. 52/26/2018-GST, which clarifies that when body fabrication occurs on customer-provided chassis with fabrication charges levied, it qualifies as manufacturing service on physical inputs owned by others.

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Issues Involved:
1. Classification of the activity of fabricating and mounting Tankers, Tippers, etc. on the chassis provided by the owner.
2. Determination of whether the activity is a supply of services.
3. Applicable accounting code for the services.
4. Applicable rate of GST for the services.

Detailed Analysis:

Issue 1: Classification of the Activity
The applicant is engaged in building bodies of various vehicles falling under Chapter 87 of the First Schedule to the Custom Tariff Act, such as mounting of tankers, tippers, etc., on chassis provided by the owner. The activity involves receiving the chassis, making drawings, purchasing materials, fabricating parts, and assembling them on the chassis.

Issue 2: Nature of the Activity as Supply of Services
The applicant contends that their activity is in the nature of working upon the goods (chassis) supplied by the Principal and converting them into Mounted Tankers, Tippers, etc. As per the Scheme of Classification of Services in the Annexure to Notification No. 11/2017 Central Tax (Rate), this activity falls under the main head of 9988, specifically under Service Code 998882, which pertains to "Other transport equipment manufacturing services." The applicable rate of GST is 18%.

The applicant cited Circular No. 52/26/2018-GST dated 09.08.2018, which clarifies that the activity of bus body building on the chassis provided by the principal is considered a supply of services and attracts 18% GST. This position is supported by various Advance Rulings across India.

Issue 3: Applicable Accounting Code
The activity of fabricating and mounting Tankers, Tippers, etc., on the chassis provided by the owner is classified under Service Accounting Code 998882, which pertains to "Other transport equipment manufacturing services."

Issue 4: Applicable Rate of GST
The applicable rate of GST is 18% in both scenarios:
- When the chassis is provided by a registered person, the activity is classified as job work under Entry No. 26(ic) of Notification No. 11/2017 Central Tax (Rate) as amended by Notification No. 20/2019 Central Tax (Rate).
- When the chassis is provided by an unregistered person, the activity is classified under "Manufacturing services on physical inputs (goods) owned by others" as per Entry No. 26(iv) of Notification No. 11/2017 Central Tax (Rate).

Findings:
The Authority for Advance Ruling considered the submissions, relevant facts, and the applicant's interpretation of the law. It was determined that the activity of bus body building on the chassis owned by the principal is a composite supply where the principal supply is the service of body building. As per Section 2(68) of the CGST Act and para 3 of Schedule II, this activity is a supply of service.

The ruling aligns with Circular No. 52/26/2018-GST, which clarifies that the fabrication of body on chassis provided by the principal is a supply of service and attracts 18% GST. The classification of the service falls under SAC 998882.

Ruling:
1. The activity of fabricating and mounting Tankers, Tippers, etc., on the chassis provided and owned by the principal is a supply of service.
2. The supply of service merits classification under SAC 998882 "Other transport equipment manufacturing services."
3. The applicable rate of GST is 18% for both registered and unregistered persons providing the chassis.

This ruling is consistent with various Advance Rulings cited by the applicant, which have persuasive value in identical matters.

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