2023 (11) TMI 871 - AAR - GST

Job work services converting raw materials into derivatives by registered person attracts 12% GST under entry 26(id)

AAR Gujarat ruled that job work services involving conversion of raw materials (Nitroantraquinone, Monon methyl Amine, Bromine) into Antraquinone ... Job work - manufacturing services on physical inputs (goods) owned by others - classification under SAC 9988 - distinction between entry (id) and entry (iv) under heading 9988 - GST @ 12% for job work services under Sr. No. 26(id) - ownership of goods remaining with the registered principalJob work - classification under SAC 9988 - GST @ 12% for job work services under Sr. No. 26(id) - distinction between entry (id) and entry (iv) under heading 9988 - Service of converting specified inputs supplied by a registered principal into anthraquinone derivatives is within Sr. No. 26(id) of Notification No. 11/2017-C.T. (Rate), as amended, classifiable under SAC 9988 and liable to GST at 12% (CGST 6% + SGST 6%). - HELD THAT: - The activity falls within the statutory definition of job work as a treatment or process undertaken on goods belonging to another registered person. The applicant performed conversion of inputs supplied by its registered client, with ownership remaining with the client. Notification No. 11/2017 (as amended) and Circular No. 126/45/2019 draw a clear demarcation between entry (id) and entry (iv) under heading 9988: entry (id) covers job work services on goods belonging to registered persons, while entry (iv) covers manufacturing services on inputs owned by unregistered persons. Applying that demarcation to the stated facts - inputs supplied by a registered principal and processing undertaken without transfer of ownership - the service squarely falls under Sr. No. 26(id) and is classifiable under SAC 9988, attracting the specified rate of 12% (6% CGST + 6% SGST). [Paras 12, 13, 14, 15, 16]Service is covered by Sr. No. 26(id) of Notification No. 11/2017 (as amended), classifiable under SAC 9988 and taxable at 12% (CGST 6% + SGST 6%).Final Conclusion: Advance ruling: the applicant's described processing of inputs supplied by a registered client is job work under Sr. No. 26(id), falls under SAC 9988 and will attract GST at 12% (6% CGST + 6% SGST). Issues: Determination of whether the service provided by the applicant falls within the purview of entry Sr. No. 26(id) of notification No. 11/2017-CT (Rate) dated 28.6.2017, as amended by notification No. 20/2017-CT (Rate) dated 30.9.2019; classification under SAC 9988; and applicability of GST at 12% [CGST 6% + SGST 6%].Brief Facts:The applicant, a partnership firm, is engaged in job work converting raw materials owned by others into Antraquinone derivatives for a registered client. The process involves various steps such as mixing, heating, centrifugation, distillation, filtration, and chilling, with ownership of goods retained by the client throughout.Discussion and Findings:The key consideration is whether the job work service provided by the applicant aligns with the definition of job work under the CGST Act, 2017, and falls under entry Sr. No. 26(id) of the notification. The circular clarifies the distinction between job work services and manufacturing services on physical inputs owned by others.Analysis:The description of heading 9988 pertains to manufacturing services on physical inputs owned by others, with job work defined as treatment or processing on goods belonging to another registered person. The applicant's process of converting specific raw materials for their registered client fits within the ambit of entry Sr. No. 26(id) of the notification.Conclusion:After careful consideration, it is ruled that the service provided by the applicant falls within entry Sr. No. 26(id) of notification No. 11/2017-CT (Rate), classified under SAC 9988, and attracts GST at 12% [CGST 6% + SGST 6%]. The ownership structure and nature of the job work align with the criteria outlined in the relevant provisions.Ruling:The service in question is deemed to fall within entry Sr. No. 26(id) of notification No. 11/2017-CT (Rate), classified under SAC 9988, and subject to GST at 12% [CGST 6% + SGST 6%].