Commercial vehicle body-building on customer-supplied chassis classified as supply of services under Para 3 Schedule II CGST Act 2017

The AAR, Kerala ruled that commercial vehicle body-building on customer-supplied chassis constitutes supply of services, not goods. Since the chassis ownership remains with the customer throughout fabrication, the activity falls under Para 3 of Schedule II, 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) under Heading 9988, which covers manufacturing services on physical inputs owned by others, with GST applicable on service fees rather than manufactured goods value.

---

---

Issues Involved:
1. Determination of whether the activity of commercial vehicles body building on a job-work basis, on the chassis supplied by the customer, constitutes a supply of goods or a supply of services.
2. Identification of the applicable rate of GST if the activity is classified as a supply of goods.
3. Identification of the applicable rate of GST if the activity is classified as 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 is a supply of goods or services. The applicant contended that their activity falls under job work as defined in the CGST/SGST Acts and is akin to a service under Schedule II, Paragraph 3. The jurisdictional officer confirmed no prior decisions on the matter. After examination, it was established that the activity of fabricating bodies on customer-owned chassis qualifies as a supply of services under Para 3 of Schedule II, as it involves treating or processing another person's goods.

Issue 2:
Since the activity was classified as a supply of services, the next step was to ascertain the applicable rate of GST. The classification of the service was determined under SAC 998881, falling under manufacturing services on physical inputs owned by others. The activity was found liable for GST at 18% (9% CGST + 9% SGST) as per the relevant entry in Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.

Issue 3:
Given the classification of the activity as a supply of services and the determination of the applicable GST rate, the ruling was issued stating that the commercial vehicle body building activity on customer-supplied chassis is indeed a supply of service. The applicable GST rate for this service was confirmed to be 18% (9% CGST + 9% SGST) under the specific entry in the notification mentioned above.

This detailed analysis of the judgment outlines the applicant's contentions, the jurisdictional officer's remarks, the discussion, findings, and the final ruling provided by the Authority for Advance Ruling in Kerala.

---