Commercial vehicle body building on job work basis classified as supply of services under Para 3 Schedule II CGST Act 2017

AAR Kerala ruled that commercial vehicle body building on job work basis constitutes supply of services, not goods. The applicant fabricates bodies on customer-owned chassis without acquiring ownership of the chassis. This activity falls under Para 3 of Schedule II of CGST Act 2017 as treatment/process applied to another person's goods. The service is classified under SAC 998881 (Motor vehicle and trailer manufacturing services) and attracts 18% GST rate under Notification No. 11/2017 Central Tax (Rate) for manufacturing services on physical inputs owned by others.

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Issues Involved:
1. Determination of whether the activity of commercial vehicle body building on a job work basis, on the chassis supplied by the customer, constitutes a supply of goods or services.
2. Classification and applicable rate of GST for the activity if it is deemed a supply of goods.
3. Classification and applicable rate of GST for the activity if it is deemed a supply of services.

Analysis:

Issue 1:
The applicant, engaged in body building of commercial vehicles, sought an advance ruling to determine if their activity on customer-supplied chassis constitutes a supply of goods or services. The applicant argued that their work falls under works contract and job work as defined in the SGST/CGST Act. They contended that the activity is a service based on Schedule II, Paragraph 3, which deems the treatment or process applied to another person's goods as a supply of service. The applicant referenced Circular No. 52/2018 to support their claim that their activity should be classified as a supply of service.

Issue 2:
The jurisdictional officer confirmed that the applicant's questions were not pending or decided under the Act. Upon examination, it was found that the applicant's service of body building on customer-supplied chassis qualifies as a supply of service under Para 3 of Schedule II of the CGST Act. The applicant fabricates the body on the customer's chassis, and the ownership of the chassis remains with the customer throughout the process. Therefore, the activity is treated as a service under the mentioned provision.

Issue 3:
Having established the activity as a supply of services, the authority classified it under Service Accounting Code (SAC) 998881, which pertains to manufacturing services on physical inputs owned by others. The applicable GST rate for this classification is 18% (9% CGST + 9% SGST) as per Notification No. 11/2017 Central Tax (Rate). The ruling confirmed that the activity of commercial vehicle body building on customer-supplied chassis is a supply of service and is subject to GST at the specified rate.

This comprehensive analysis of the judgment outlines the arguments presented by the applicant, the jurisdictional officer's remarks, and the authority's detailed discussion leading to the ruling on the classification and applicable rate of GST for the activity in question.

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