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2024 (4) TMI 843
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....aration of PU foam; ii. they purchase of HDPE granules required for preparation of HDPE jackets; and iii. they purchase of PE films required for winding PU foam. The PU foam is either sprayed or injected and PE film or HDPE are further wound/jacketed to the bare M.S. pipes to provide insulating properties to allow storage/transportation of hot or cold material. A flowchart of the two types of manufacturing process viz. insulation by way of spray of PU foam; and insulation by way of injection of PU foam, undertaken by the applicant on bare M.S. pipes to obtain pre-insulated M.S. pipes has been submitted by the applicant along with the application. 4. The applicant has further stated as under:- • that they receive bare M.S. pipes on job work basis under delivery challan and after carrying out the necessary process of adding PU Foam and PE film/HDPE jacket, they send back the pre-insulated M.S. pipes to customers in terms of section 143, ibid', • that in terms of para 3 of Schedule-II of the CGST Act, 2017, any treatment or process which is applied to another person's good is a supply of service; • that in terms of....
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.... • that while Sr. No. 26 (Heading 9988) of the notification covers manufacturing services on physical inputs (goods) owned by others, Sr. No. 27 (Heading 9989) of the notification covers other manufacturing services; that there is no condition under SI. No. 27 of the notification regarding ownership of the goods on which manufacturing service is carried out; • that the service provided by them is not covered under Sr. No. 26 of notification ibid since though the activity amounts to manufacture, the process is not performed entirely on physical inputs owned by others; • that the services provided by the applicant are covered under Sr. No. 27 of heading 9989 of the notification and chargeable to GST @ 18% (9% CGST + 9% SGST); 5. In view of the foregoing, the applicant has raised the following question viz,- 1. Whether the activity of insulating of bare M.S. Pipes provided by the customers on job work basis by using PU Foam and PE Film/HDPE jackets owned by the applicant would be classifiable under clause (iv) of Sr. No. 26 or under Sr. No. 27 of notification No. 11/2017-CT (Rate) dated 28.6.2017. 6. Personal hearing in the matter was ....
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.... which is applied to another person's goods is a supply of services. • Notification No. 11/2017-Central Tax(Rate), dated 28.06.2017 [as amended] G.S.R....(E).-In exercise of the powers conferred by sub-section (1) of section 9, sub-section (1) of section 11, sub-section (5) of section 15 and sub-section (1) of section 16 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby notifies that the central tax, on the intra-State supply of services of description as specified in column (3) of the Table below, falling under Chapter, Section or Heading of scheme of classification of services as specified in column (2), shall be levied at the rate as specified in the corresponding entry in column (4), subject to the conditions as specified in the corresponding entry in column (5) of the said Table:- 26 Heading 9988 (Manufacturing services on physical inputs (goods) owned by others) (i) Services by way of job work in relation to- (a) Printing of newspapers; [(b) Textiles and textile products falling ....
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....uding Braille books), journals and periodicals (c) printing of all goods falling under Chapter 48 or 49, which attract CGST @2.5 per cent, or Nil.]^109 2.5 -]^110 [(iia) Services by way of any treatment or process on goods belonging to another person, in relation to printing of all goods falling under Chapter 48 or 49, which attract CGST @ 6 per cent. 6 -]^111 [(iii) Tailoring services. 2.5 -]^112]^113 [(iv) Manufacturing services on physical inputs (goods) owned by others, other than [(i), (ia), (ib), (ic),(ica), (id), (ii), (iia) and (iii)] ^114 above. 9 -]^115 27 Heading 9989 [Other manufacturing services; publishing, printing and reproduction services; material recovery services 9 -]^117 • Circular No. 126/45/2019-GST dated 22.11.2019 2. The matter has been examined. The entries at items (id) and (iv) under heading 9988 read as under: (3) (4) (5) (id) Services by way of job work other than (i). (ia), (ib) and (ic) above; 6 - (iv) Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ib), (ic), (id), (ii), (iia) and (iii) above. 9 - ....
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....s follows: 9. The above authorities reiterate the well-established law that Circulars issued by the Central Board of Excise & Customs are binding. The law also is that if a tariff item makes no difference between coated and uncoated goods then the mere process of coating would not amount to manufacture of some new commodity. Merely because some extra process is carried on the product would not by itself mean that a new item has come into existence. In this case the tariff item reads as follows : Heading No. Subheading No. Description of goods Rate of duty (1) (2) (3) (4) 73.03 7303.00 Tubes, pipes and hollow profiles, of cast iron Rs 100 per tonne 73.04 Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel 7304 10 - Of iron Rs. 100 per tonne 7304 90 - Other Rs. 1,500 per tonne." Thus it is Io be seen that the tariff item makes no distinction between coated and uncoated tubes, pipes etc. The Board had in June 1988 issued a Circular clarifying that the process of guniting i.e. cement mortar coating on the outside did not amount to manufacture of a new product....
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....intermediate iron and steel casting products are typically not identifiable in the Harmonized Commodity Description & Coding system based on their future use Note 2: The resulting intermediate casting products are typically not identifiable in the Harmonized Commodity Description & Coding system based on their future use. Note 3: The resulting intermediate metal products are typically not identifiable in the Harmonized Commodity Description & Coding system based on their future use. We find that the activity of coating of MS pipes performed by the applicant does not fall within the ambit of either of the sub-headings mentioned supra. The averment therefore that their activity would fall under Sr. No. 27 (heading 9989) lacks merit. 16. The question that would then arise is what is the proper heading in respect of the activity performed by the applicant. We find that the CBIC has already clarified the issue with its Circular No. 126/45/2019-GST dated 22.11.2019, the relevant paras of which are also already reproduced supra. Consequent to insertion of entry 26(id) under heading 9988 of notification No. 11/201 7-CT (Rate), ibid, which prescribes 12% GST for all ....
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.... is based on the service fee paid, not the value of the goods manufactured. Note 2: The service code includes metal treatment and coating services, general machining services, cutlery, hand tool and general hardware manufacturing service and other fabricated metal product manufacturing services not elsewhere classified. [emphasis added] The activity undertaken by the applicant of coating of M.S. pipes falls within SAC code 998873 in terms of Note 2 supra. Thus, even on this ground the averment that the activity would fall within the ambit of SAC code 9989 is ruled out. 18. Further, on going through the Agenda and the Minutes of the 37^th GST Council Meeting, it is observed that the point was examined by the fitment committee and included in the Agenda, which was thereafter deliberated and accepted by the GST Council as recorded in the Minutes of the Meeting, viz Annexure IV Recommendation made by the Fitment Committee for making change in GST rate or for issuance of clarification in relation to service SI.No. Proposal Justification Fitment Committee Recommendation 1 To reduce GST on job work on diamonds from- (a) 5 % to 1%-2% (Guja....
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....may be charged at uniform rate of 5% Reference. Laghu Udyog Bharti i. To being engineering job work at par with leather & textile job work. ii. Most job workers belong to small and medium scale sector and varying rates create problem in compliance and managing chaIlans. Further, in job work credit flows from principal and job workers. It is revenue neutral exercise. Recommendation: The rate of GST on all job work services, which are not currently eligible for the 5% rate may be reduced to 12%. Analysis: The rate of job work services has been reduced to 5% mainly where the final product attracts GST @ 5% or lower, such as textile sector, processing of hides, skin, leather and tool wear. printing of books and newspapers, diamond culling and polishing, manufacture of handicraft goods. tailoring services etc. The GST applicable on job work services in other major sectors such as manufacturing of industrial goods, automobiles. chemicals. pharmaceuticals, heavy engineering goods, machines and instruments, steel and other metals is 18% Job workers in the engineering and automobile sector have substantial ITC. The inputs and input services used by job worker....
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....f Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue. This was reiterated in the case of Ratan Melting and Wire Industries [2008 (12) STR 416 (SC)], wherein the Hon'ble SC held that circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes. Thus, dutifully, following the clarification issued by the circular dated 22.11.2019, issued by CBIC, we find that in respect of services by way of treatment or processing undertaken by the applicant on goods belonging to another registered person, the same would be classified under 26(id) of notification no. 11/2017-CT(Rate), ibid, under the heading 9988. Likewise, for services by way of treatment of processing undertaken by the applicant on physical inputs which are owned by persons other than those registered under CGST Act, would be classified under 26(iv) of notification no. 11/2017-CT(Rate), ibid, under the heading 9988. Further, we find that vide Circular No. 38/12/2018 dated 26.03.2018, GST Policy Wing, CBIC, New Delhi has clarified as follows: 5. Scope/ambit of job work: Doub....
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....chedule to the Customs Tariff Act, 1975 (51 of 1975) " 100. Omitted vide notification No 03/2022-Central Tax (Rate) dt 13 07.2022. Prior to it, it reads as "(ea) manufacture of leather goods or foot wear falling under Chapter 42 or 64 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) respectively;." 101. Omitted vide notification No 03/2022-Central Tax (Rate) dt 13.07.2022. Prior to it, it reads as "(h) manufacture of clay bricks falling under tariff item 69010010 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975),]) " 102. Inserted vide notification No. 46/2017-Central Tax (Rate) dt. 14.11.2017 103. Omitted Explanation vide Noti 20/2017-Central Tax (Rate) dt 22.08.2017 The following was omitted "Explanation - 'man-made fibres' means staple fibres and filaments of organic polymers produced by manufacturing processes either.- (a) by polymerisation of organic monomers to produce polymers such as polyamides, polyesters, polyolefins or polyurethanes, or by chemical modification of polymers produced by this process [for example, poly (vinyl alcohol) prepared by the hydrolysis of poly(vinyl acetate)]; or (b) b....