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 derivatives by applicant on goods belonging to registered principal falls under entry 26(id) of notification 11/2017-CT (Rate). The service is classifiable under SAC 9988 as manufacturing services on physical inputs owned by others and attracts GST at 12%. The ruling distinguished between entry (id) covering job work by registered persons versus entry (iv) covering manufacturing services for unregistered persons.

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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%].

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