2023 (7) TMI 522 - AAR - GST

Vehicle bodybuilding on customer chassis classified as service under Para 3 Schedule II CGST Act 2017

The AAR Kerala ruled that bodybuilding activities on customer-owned vehicle chassis constitute supply of services under Para 3 of Schedule II, CGST Act ... Classification of supply - rate of GST - Supply of service or not - treatment or process of bodybuilding by fabrication and other processes carried out on chassis of motor vehicles owned by others - activity of body building is considered as a supply of service or not and service code - rate of tax on activity of an accident repairing job on the vehicle supplied by the owner for such job if a lump sum price is charged that includes the cost of material and labour. HELD THAT:- As per Para 3 of Schedule II of the CGST Act, 2017 which lists out the activities or transactions to be treated as supply of goods or supply of Services; any treatment or process which is applied to another person's goods is a supply of service. In the instant case, the applicant is building the body of commercial vehicles for carrying goods on the chassis supplied by the customer as per the specifications of the customer. The applicant is collecting the charges for the activity which include the cost of inputs/material used by the applicants and the labour charges for the fabrication of the body. Thus, it is evident that the applicant is fabricating the body on the chassis belonging to the customer - the applicant is fabricating the body on the chassis belonging to another person and hence the activity is squarely covered under Para 3 of Schedule II of the CGST Act, 2017 as a treatment or process (which is applied to another person's goods and accordingly is a supply of services. Classification of the activity and the rate of GST applicable - HELD THAT:- The value of the services in this heading is based on the service fee paid, not the value of the goods manufactured. SAC-99888 under Heading 9988 pertains to Transport equipment manufacturing services and Sub-Heading 998881 pertains to the Motor vehicle and trailer manufacturing services. Therefore, the activity of the applicant as discussed above is appropriately classifiable Under Service Accounting Code 998881. Classification and applicable rate of tax for the activity of accident repairing job on a lump sum price basis including the cost of material and labour - HELD THAT:- As per Heading 998714, the repair and maintenance services may be paid by the owner of the goods being repaired or by a warranty and may include labour, pails, and supplies used in providing repair or maintenance services - This Heading Covers collision repair, accident repair, etc. Therefore, the activity of the applicant as discussed above is appropriately classifiable under Service Accounting Code 998714. Accordingly, the activity is liable to GST at the rate of 18% as per entry at SI. No. 25 (ii)- 9987- “Maintenance, repair and installation (except construction) services, other than (i),(ia) and (ib) above and serial number 38 below” of Notification No 11/2017 Central Tax (Rate) dated 28/06/ 2017. Issues Involved:1. Whether the treatment or process of bodybuilding by fabrication and other processes carried out on the chassis of motor vehicles owned by others is a supply of service.2. Rate of GST applicable on the bodybuilding service.3. Service code (tariff) for the bodybuilding activity.4. Nature of supply, tariff code, and rate of GST if bodybuilding is not considered a supply of services.5. Classification and applicable rate of tax for accident repairing jobs on vehicles supplied by the owner for such jobs if a lump sum price is charged that includes the cost of material and labor.Issue-wise Detailed Analysis:1. Supply of Service:The applicant, engaged in bodybuilding on chassis provided by customers, requested a ruling on whether this activity constitutes a supply of service. The judgment referred to Para 3 of Schedule II of the CGST Act, 2017, which states that any treatment or process applied to another person's goods is a supply of service. The applicant builds bodies on chassis owned by customers, without transferring ownership of the chassis. Thus, the activity is classified as a supply of service.2. Rate of GST:Since the activity of bodybuilding is considered a supply of service, the applicable GST rate is determined. The judgment referred to Notification No. 11/2017 Central Tax (Rate) dated 28/06/2017, which specifies that manufacturing services on physical inputs (goods) owned by others fall under Service Accounting Code (SAC) 9988. The applicable GST rate for this service is 18% (9% CGST + 9% SGST).3. Service Code (Tariff):The service code for the bodybuilding activity on another person's chassis is classified under SAC 9988. Specifically, it falls under the sub-heading 998881, which pertains to motor vehicle and trailer manufacturing services.4. Nature of Supply if Not Considered a Service:This issue was deemed irrelevant as the activity was already classified as a supply of service under the previous points.5. Classification and Applicable Rate of Tax for Accident Repairing Jobs:For accident repairing jobs charged on a lump sum basis, including the cost of material and labor, the judgment referred to the Scheme of Classification of Services under Heading 998714. This heading covers maintenance and repair services of motor vehicles, including various types of repairs and maintenance activities. The applicable GST rate for these services is 18% (9% CGST + 9% SGST) as per entry at SI. No. 25 (ii) of Notification No. 11/2017 Central Tax (Rate) dated 28/06/2017.Rulings:1. The activity of bodybuilding of motor vehicles on the chassis supplied by the customer is a supply of services.2. The applicable GST rate for the bodybuilding service is 18% (9% CGST + 9% SGST).3. The service code for the bodybuilding activity is SAC 9988.4. Not relevant due to the classification of bodybuilding as a supply of service.5. The classification for accident repairing jobs on vehicles supplied by the owner, charged on a lump sum basis, is SAC 998714, with an applicable GST rate of 18% (9% CGST + 9% SGST).