GST on repair of Jewellery by Jeweller

[ROHIT GOEL]

Dear Experts,

A jeweler is providing services of repair of jewellery to end customers. It is outsourcing this work to job workers who charge it GST at 5%. Further, the jeweler is also invoicing these services to customers at 5%. Department has now raised issue that tax on these services was 18% as per Entry no. 26(iv) of NN 11/2017-CT(Rate) as 5% applies only to job work which only covers services provided by registered person to registered persons as per definition under Section 2 of CGST Act 2017.

Kindly advice correct course of action in this regard.

[Amit Agrawal]

Prima-facie, Repairing services - provided by the jeweler to his customers - falls under HSC 9987 and not under HSC 9988. And as per Serial No. 25 (ii) of Notification No. 11/2017-Central Tax (Rate) (as amended till date), applicable rate of tax is 18 % (9% + 9%).

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

However, if any material (i.e. gold) is used in such repairing work & if it is composite supply (consisting of supply of gold (i.e. goods) as well as labor (i.e. services) in the form of repairing, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply), then, one needs to first determine what is 'principal supply'. And applicable tax-rate for entire activity will be the 'tax-rate applicable for such principal supply'.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Job work definition covers treatment / process undertaken on goods of REGISTERED PERSONS.

So 5% if JW done for a registered person and 18% otherwise

Circular No. 126/45/2019-GST, dated 22-11-2019 is relevant for this

[Ganeshan Kalyani]

18% GST is applicable

[Vijay kumar]

There are 2 aspects - (i) GST at the hands of job worker and (ii) GST at the hands of the principal who is getting this done on job work..

For the job worker, the classifn is under SAC 9988. GST rate would depend on whether the principal is registered or not and accordingly it would be 12% or 18% respectively (entry 26 (id) or (iv) of Nofn.11/2017). For the jeweler principal, he is providing the service of Repair of jewelery which is classifiable under 998722 which would attract GST rate of 18% under entry 25(ii) of the said Nofn.

Accordingly, 5% rate seems to be incorrect.

[Amit Agrawal]

As per query, subject services of in nature of 'repairs of jewellery' which are owned by end-customers of the jeweler.

Description of HSN 9988 (i.e. Manufacturing services on physical inputs owned by others) - Explanatory Notes to the Scheme of Classification of Services - is as under:

"The services included under Heading 9988 are performed on physical inputs owned by units other than the units providing the service. As such, they are characterized as outsourced portions of a manufacturing process or a complete outsourced manufacturing process. Since this Heading covers manufacturing services, the output is not owned by the unit providing this service. Therefore, the value of the services in this Heading is based on the service fee paid, not the value of the goods manufactured."

To my mind, GST @ 5 % at the hands of alleged job-worker is also incorrect. Correct tax-rate thereof is 18% as per Serial No. 25 (ii) of Notification No. 11/2017-Central Tax (Rate) (as amended till date).

This is becuase, in my view, the subject services are falling under HSN 9987 (i.e. Maintenance, repair and installation (except construction) services), more specifically under HSN 998722 (i.e. Repair services of watches, clocks and jewellery) & NOT under HSN 9988 (i.e. (i.e. Manufacturing services on physical inputs owned by others)) OR more particularly, under HSN 998892 (i.e. Jewellery manufacturing services).

These are ex facie views of mine and the same should not be construed as professional advice / suggestion. And I respect contrary views.

AI Summary

GST classification of jewellery repair: service or job work status determines whether job-work concessions apply or standard service rates apply.
Classification determines GST: repair of customer-owned jewellery is principally described as Maintenance and Repair Services (HSN/SAC 9987 / 998722) attracting the rate specified in Entry 25(ii) of Notification No. 11/2017, while the concessional job-work treatment applies only where the activity is bona fide job work performed on inputs belonging to a registered person as defined and supported by applicable circular guidance; if the transaction is a composite supply with goods as the principal element, the principal supply's rate governs.