2024 (10) TMI 433 - AAR - GST

Body building activity on customer-owned chassis constitutes supply of services under Section 2(68) CGST Act 2017

The AAR held that body building activity on customer-owned chassis constitutes supply of services, not goods. When chassis is provided by GST-registered ... Classification of supply - supply of services or supply of goods - job work activity or not - body building activity on the chassis (meant for carrying goods) owned and provided by the principal (who is either independent customer who buy the chassis from OEM and send for body building or Chassis sent by OEM i.e. manufacturer of chassis who sends for body building activity) - to be classified under SAC Code - 998881 “Motor vehicle and trailer manufacturing services or under 8707 as “Bodies (including cabs), for the motor vehicles of headings 8701 to 8705? - HELD THAT:- It is found that any treatment or process which is applied to another person’s goods is a supply Of service. In the instant case the chassis is being supplied by customers to the applicant and the applicant undertakes the activity of body building on the chassis supplied to them. Hence the activity of body building on customer owned chassis is a ‘supply of service. It is found that though the applicant has not submitted as to whether the individual private customer who buys the chassis from OEM and provide the same to the applicant for body building is registered under GST or not, the provisions of law enumerated in the preceding paras make a clear demarcation between the supply of body building activity made to GST registered persons and the supply of body building activity made to GST I-in-registered persons. Whereas the bus body building on chassis owned by GST registered customer is Job work, the bus body building on chassis owned by un-registered customer does not amount to job work. As per the definition of Job Work provided under Section 2 (68) of CGST Act 2017, “job work” means any treatment or process undertaken by a person on goods belonging to another registered persons and the expression “job worker” shall be construed accordingly. Hence, in as much as the treatment or process is undertaken on the goods belonging to un-registered person the same does not qualify to be job work - the activity Of body building by the applicant on chassis owned and provided by registered customer or un-registered customer both fall under the scope of supply of service and as per the scheme of classification of services merits to be classified at Heading 9988 Manufacturing services on physical inputs (goods) owned by others’ and precisely at Service code (Tariff) 998881 ‘Motor vehicle and trailer manufacturing services’. If it is regarded as “job work activity” and “Supply of Services, whether the correct applicable rate of GST, will be at % (9+9) as applicable under Sr. No.26 (ic) or wilt it be 18% (9+9) as applicable under Sl. No. 26 (iv)? - HELD THAT:- The bus body building on chassis owned by GST registered customer amounts to Job work and the bus body building on chassis owned by un-registered customer does not amount to job work The rate of tax in both the cases i.e. if chassis is provided by the GST registered person or when chassis is provided by GST un-registered person, would be 9% under the CGST Act, 2017 and 9% under the SGST Act,2017, as per Entry No.26 (ic) and per Entry No. 26 (iv) respectively of the CGST Notification No. 11/2017 CT (R) dated 28-06-2017 and SGST Notification No. II(2)/CTR532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017. Issues Involved:1. Classification of body building activity as 'job work activity' and 'Supply of Services' under SAC Code 998881.2. Applicable GST rate for body building activity classified as 'job work activity' and 'Supply of Services.'3. Classification of body building activity as 'Supply of Goods' under HSN Code 8707.Detailed Analysis:Issue 1: Classification as 'Job Work Activity' and 'Supply of Services'The applicant sought to classify the body building activity on chassis supplied by the principal as 'job work' and 'Supply of Services' under SAC Code 998881. The applicant argued that the activity should be considered as 'Supply of Services' based on CBIC Circular No. 52/26/2018-GST dated 09.08.2018, which clarifies that fabrication of body on chassis provided by the principal merits classification as service, attracting 18% GST. The ruling confirmed that the activity of body building on customer-owned chassis is a 'supply of service' under Schedule II of the CGST Act, 2017, which states that any treatment or process applied to another person's goods is a supply of services. However, it was clarified that only body building on chassis owned by GST registered customers qualifies as 'job work.'Issue 2: Applicable GST RateThe applicant questioned whether the GST rate for the body building activity, classified as 'job work activity' and 'Supply of Services,' should be 18% (9% CGST + 9% SGST) under Entry No. 26 (ic) or Entry No. 26 (iv) of Notification No. 11/2017-Central Tax (Rate). The ruling clarified that the GST rate for body building on chassis provided by both GST registered and unregistered customers is 18% (9% CGST + 9% SGST), as per Entry No. 26 (ic) for registered customers and Entry No. 26 (iv) for unregistered customers.Issue 3: Classification as 'Supply of Goods'The applicant also sought clarification on whether the body building activity should be regarded as 'Supply of Goods' under HSN Code 8707, attracting 28% GST. The ruling determined that since the activity is classified as 'Supply of Services,' the question of it being 'Supply of Goods' does not arise, and thus, this query was not answered.Conclusion:The ruling concluded that the body building activity on chassis supplied by the principal is a 'Supply of Services' and falls under SAC Code 998881. The applicable GST rate is 18% (9% CGST + 9% SGST) for both registered and unregistered customers. The classification as 'Supply of Goods' under HSN Code 8707 was not addressed due to the service classification.