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 customers, the activity qualifies as job work under Section 2(68) of CGST Act 2017. However, when chassis is owned by unregistered customers, it does not constitute job work since job work requires goods belonging to registered persons. Both scenarios are classified under SAC Code 998881 (Motor vehicle and trailer manufacturing services) at 18% GST rate (9% CGST + 9% SGST) under Entry 26(ic) and 26(iv) respectively of CGST Notification 11/2017.

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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 Rate

The 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.

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