Pipe insulation services using PU foam and PE film materials classified under entry 26 at 12% GST rate AAR Gujarat ruled on classification of pipe insulation services where applicant coats customer-provided M.S. pipes using own PU foam and PE film ...
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Pipe insulation services using PU foam and PE film materials classified under entry 26 at 12% GST rate
AAR Gujarat ruled on classification of pipe insulation services where applicant coats customer-provided M.S. pipes using own PU foam and PE film materials. Following CBIC Circular 126/45/2019-GST, the authority held services fall under entry 26(id) at 12% GST when performed for registered customers, and under entry 26(iv) when performed for unregistered persons. The ruling clarified distinction between job work services under section 2(68) and manufacturing services on physical inputs owned by others, with activity classified under SAC code 998873 rather than 9989.
Issues Involved: 1. Classification of the activity of insulating bare M.S. Pipes. 2. Determination of applicable GST rate for the activity.
Summary:
Issue 1: Classification of the activity of insulating bare M.S. Pipes
The applicant, M/s Perma Pipe India Private Limited, is engaged in the activity of adding insulation to bare M.S. pipes to convert them into pre-insulated M.S. pipes. The process involves the use of PU Foam and PE film/HDPE jackets, which are owned by the applicant. The applicant contends that this activity amounts to manufacture as per section 2(72) of the CGST Act, 2017. However, the Hon'ble Supreme Court in the case of M/s. Tega India Ltd [2004 (164) ELT 390 (SC)] held that coating does not amount to manufacture of a new product. Consequently, the applicant's claim that their activity constitutes manufacturing is not tenable.
Issue 2: Determination of applicable GST rate for the activity
The applicant seeks clarification on whether their activity falls under clause (iv) of Sr. No. 26 or Sr. No. 27 of notification No. 11/2017-CT (Rate) dated 28.6.2017. The Assistant Commissioner, CGST, Kutch, opined that the activity is classifiable under Sr. No. 26(iv) [heading 9988] and not under Sr. No. 27. The CBIC Circular No. 126/45/2019-GST dated 22.11.2019 clarifies that job work services as defined u/s 2(68) of the CGST Act are covered under Sr. No. 26(id) [heading 9988], which prescribes a GST rate of 12%. The circular further distinguishes between entries at items 26(id) and 26(iv), stating that item (iv) covers services on physical inputs owned by persons other than those registered under the CGST Act.
The applicant's activity of insulating bare M.S. pipes provided by registered customers on a job work basis using PU Foam and PE Film/HDPE jackets owned by the applicant is classifiable under clause (id) of Sr. No. 26 of notification No. 11/2017-CT (Rate) dated 28.6.2017. For similar services provided on goods belonging to unregistered persons, the activity falls under clause (iv) of Sr. No. 26 of the same notification.
Ruling:
The activity of insulating bare M.S. Pipes provided by registered customers on a job work basis using PU Foam and PE Film/HDPE jackets owned by the applicant is classifiable under clause (id) of Sr. No. 26 of notification No. 11/2017-CT (Rate) dated 28.6.2017. For similar services provided on goods belonging to unregistered persons, it is classifiable under clause (iv) of Sr. No. 26 of the same notification.
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