AI Drafter 
TaxTMI 
TaxTMI 
2020 (9) TMI 689
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....um fabrication charges (including certain material that would be consumed during the process of body building). The applicant is carrying out this activity for manufacturing of tipper, tanker, trailer etc. on chasis provided by the owners of such vehicles. The process of said manufacturing activity is as under: i. Received chasis at workshop ii. Purchase raw steel and receive it at workshop iii Prepare cutting plan and drawing iv Cutting and bending of raw material v Welding of all cutting and bending part vi. Assembly of all fabricated parts vii Final product on chasis. 3. The applicant further submitted that sometimes they charge separately for parts and for repairing job charges and are paying due GST as applicable on goods or repairing service separately. 4. The applicant submitted that in addition to the said activity they carry out accident repairing job on vehicle supplied by its owner for repairing job for a lump sum price that includes cost of material and labour. 5. Accordingly, the applicant sought Advance Ruling on the following question: A. Whether the treatment or process of body building....
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....pply would merit classification as service and 18% GST as applicable will be charged accordingly. 8. The applicant has relied upon the Order dated 21.08.2018 of Advance Ruling Authority of Goa in the case of Automobile Corporation of Goa Limited wherein it is ruled that, "the activity of building and mounting of the body on the chasis provided by the principal under FOC challan will result in supply of services under HSN 9988 and hence, should be taxed at 18% GST". 9. The applicant submitted that Service Accounting Code 9988 covers "Manufacturing Service on Physical Inputs (Goods) owned by others". Thus it appears that the nature of activity of body building and mounting of the body on the chasis provided by the principal will result in supply of service under HSN Code 9988 and hence should be taxed at 18% of GST even in terms of clear description of services provided at Annexure relating to scheme of classification of services as given along with Notification No. 11/2017-CT (Rate) dated 28.06.2017 and the relevant extract there from is given below for ready reference: Sl.No. Chapter, Section, Heading or Group Service Code (Tariff) Service Description 498 He....
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.... the body requirement differ from party to party and the body is fabricated on chasis itself; they carry out the activity of step by step as enumerated for building of the body on the chasis supplied by the owner using their own inputs and capital goods ; they do not supply any ready buit body to any party but provide only service of fabrication. 13. The applicant further submitted that issue involved in their application for advance ruling is no more re integra and the same is already clarified by the CBIC Circular No. 52/26/2018-GST dated 09.08.2018. 14. The applicant has relied upon the Advance Ruling given by the various State authorities. All the such Ruling are summarized as below for ready reference: (i) Advance Ruling No. GOA/GAAR/1 of 2017-18/2018-19/1929, dated 21-8-2018 in RE : AUTOMOBILE CORPORATION OF GOA LIMITED = 2018 (10) TMI 1044 - AUTHORITY FOR ADVANCE RULING, GOA, wherein it is held that, "Activity of building and mounting of the body on chassis provided by the principal under FOC challan results in supply of services under HSN 9988 and hence, taxable @ 18% GST". (ii) Advance Ruling No. KER/39/2019, dated 2-3-2019 in RE : KONDODY AUTOCRAFT....
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....ra 12.2(b) of the above mentioned CBIC circular clarifying that fabrication of body on chasis provided by the principal (not on account of the body builder), the supply would merit classification as service and 18% GST as applicable will be charged accordingly. 16. The applicant further submitted that in view of the facts it appears clear that the process of body building by fabrication and other process carried out on chasis of motor vehicles owned by other is supply of service considering the following facts : (i) Activity carried out by them should be treated as supply of service because in terms of Paragraph 3 of Schedule-II of the CGST Act, 2017, any treatment or process which is applied to another person's goods is a supply of service. As they provide service of fabricating and body building on motor vehicles chasis belonging to another person as per the requirements of their customers on goods (input)/ chasis provided by them. There is no transfer of ownership for providing such services and thus it appears clear that it is supply of service. (ii) The activity of body building shall not be treated as supply of goods or motor vehicle as the activity carri....
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.... to scheme of classification of services as given along with Notification No. 11/2017-CT (rate) dated 28.06.2017, the relevant extract therefrom is given in their application for advance ruling. 18. The applicant further submitted that as regards the classification of the activity of accident repairing job on the vehicles supplied by the owner for such job for a lump sum price is concerned, they are of the bonafide belief that this activity should be treated as service even though it includes cost of material and labour in view of the provision of Paragraph 3 of the Schedule-II of the CGST Act, 2017 that categorically states that "any treatment or process which is applied to another person's goods is supply of services". Further stated that it appears that the classification of this activity should be under Service Code (Tariff) 998729 that includes "Maintenance and repair service of other goods nowhere else classified" and should attract total rate of 18% GST on value of supply of such service. 19. The applicant submitted that since the activity of body building is considered as supply of services and not that of goods, the fifth issue raised by us should become irrelevant. ....
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....he process of body building). The applicant has submitted the process of said manufacturing activity and same is reproduced as under: i. Received chasis at workshop ii. Purchase raw steel and receive it at workshop iii Prepare cutting plan and drawing iv Cutting and bending of raw material v Welding of all cutting and bending part vi. Assembly of all fabricated parts vii Final product on chasis 23. The applicant has contended that the activity of body building and fabrication on the chassis provided by the principal (not on account of body builder), supply would merit classification as service and 18% GST as applicable will be charged. The activity of body building shall not be treated as supply of goods or motor vehicle as the activity carried out by them is not the supply of motor vehicle as they do not own the chasis. The applicant submitted that there is no transfer of ownership for providing such services and thus it appears supply of service. 24. In view of the above, the question before us to decide is whether the applicant's activity amounts to supply of goods (motor vehicle) that merits classification und....
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....ted element. As per Sec. 2(30) "composite supply" means "supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply". As per Section 2(68) of the CGST Act, 2017 and as per para 3 of the Schedule II of the CGST Act "any treatment or process which is applied to goods of another person's is a supply of service." 27. Accordingly, the activity of mounting/fabrication of body on the chasis supplied by the principal would be supply of service as principal supply and Section 8(a) of CGST Act, 2017 determines tax liability on composite supply, which reads as under :- "The Tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and" 28. Now, We find that the activity and question raised before us has been suitably clarified and dealt with....
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.... as supply of service attracting GST @ 18%. 29. The applicant vide letter dated 15.06.2020 submitted on sample basis (i) vehicle delivery report (ii) quotation (iii) work order (iv) temporary certificate of registration and (iv) Job work Challan but applicant have not submitted the copy of Invoice, which was raised to the customer for collecting Job work/ fabrication charges. In cases, where the applicant receives the chasis on his own and manufactures the body building on the chasis and thereafter supplies the complete body built vehicle to the customer charging the value of motor vehicle, he is supplying goods and service both. Accordingly, supply would amount to composite supply. In this regard, CBIC vide Circular No. 34/8/2018-GST, dated 1-3-2018 has issued the clarification. The clarification is read as under : S.No. Issue Clarification 1. Whether activity of bus body building, is a supply of goods or services? In the case of bus body building there is supply of goods and services. Thus, classification of this composite supply, as goods or service would depend on which supply is the principal supply which may be determined on the basis of facts and circums....
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....d to the Not. No. 11/2017-CT (Rate) dated 28.06.2017. As stated above, the applicant is engaged in the manufacturing of body building on the chasis supplied by the owner of the chasis. Therefore, the said service would be classified under Service Accounting Code 9988 "Manufacturing Service on Physical Inputs (Goods) owned by others". The relevant entry Sr. No. 498 of the classification of the Service is as reproduced as under: Sl.No. Chapter, Section, Heading or Group Service Code (Tariff) Service Description 498 Heading 9988 Manufacturing services on physical inputs (goods) owned by others 534 Group 99888 Transport Equipment Manufacturing Service 998881 Motor vehicle and trailer manufacturing services 998882 Other transport equipment manufacturing services 32. In respect of the question raised by the applicant, we hold that on fabrication of bus body on the chassis supplied by the owner of chasis i.e. Principal on delivery challan, on which body is fabricated on chasis by collecting job work charges including inputs required for such fabrication work and in no case ....
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....s or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply". As per Sec. 2(90) principal supply means, "the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary". Sec. 8(a) determines tax liability on composite supply, which reads as under :- "The Tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply;" 35.2 In view of the above legal provisions, the applicant's activity of repairing work carry out on the damaged vehicle is a principle supply. In order to determine the Service Accounting Code (SAC), we refer to the Annexure to the Notification No. 11/2017-CT (Rate) dated 28.06.2017, which prescribes the Service Accounting Code for each type of services. We also refer to the explanatory Notes on Classification of Service ....
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....pair and maintenance services may be paid by the owner of the good being repaired or by a warranty and may include labour, parts and supplies used in providing repair or maintenance services. 35.3 From the above, it is seen that the nature of service received by the application is covered under the Service Accounting Code 998714. Accordingly, Sr. No. 25 of Notification No. 11/2017-CT (Rate) dated 28.06.2017 prescribing tax rate of 18% on Maintenance, repair and installation (except construction) services. The relevant entry Sr. No. 25 of Notification No. 11/2017-CT (Rate) dated 28.06.2017 is as under: 25 Heading 9987 Maintenance, repair and installation (except construction) services. 9 - 35.4 The contention of the applicant that the said service would be covered under Service Code (Tariff) 998729 that includes " Maintenance and repair service of other goods nowhere else classified" is not tenable as such Service Accounting Code 998714 defines the maintenance and repairing service of motor vehicles like cars, trucks, vans and buses. Therefore, we hold that repairing service carried out by the applicant on damaged vehicle supplied by the owner is classifiable u....