In re Garware Industries Limited (GST AAR Maharashtra)
Question: – Whether as per Notification no. 20/2019 dated 30/09/2019, services provided by Garware industries Limited falls under clause (id) Heading 9988.
Answer:- The Impugned services provided by applicant falls under clause (id) Heading 9988.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MAHARASHTRA
PROCEEDINGS
(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively ] by M/s. Garware Industries Limited, the applicant, seeking an advance ruling in respect of the following question.
Whether as per Notification no. 20/2019 dated 30/09/2019, services provided by Garware industries Limited falls under clause (id) Heading 9988.
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression “GST Act? would mean CGST Act and MGST Act.
2. FACTS AND CONTENTION – AS PER THE APPLICANT
The submissions made by Garware Industriees Limited, the applicant are as under:-
2.1 Garware Industriees Limited (herein referred as GIL) having GST Registration No.27AAACY5779P 1ZB for unit located at GUT No 374,376 378 Aurangabad Pune Road Waluj A urangabad-431133 is engaged in processing and conversion of Plain Polyester Film into processed All Types of Polyester films (i.e. Dyed Film, Laminated Films, TS Films, PPF Films). GIL, an associate company of Garware Polyester Limited (herein referred as GPL), is covered by section 40A (2) (b) of the Income Tax Act, 1961.
2.2 GPL is a GST registered flagship company of the Garware Group and manufactures and sells all Jypes of Polyester films like (a) Plain Films, (b) Laminated films/Sun control film manufactured from Dyed films (c) PPF Films etc.
2.3 GPL sends Plain Polyester Films along with all other required input (collectively referred to as ‘inputs) to GIL for Manufacturing/converting of Plain Polyester films into Dyed/Laminated/TS Films on Job-work basis. (Using all types of Polyester Film as input) and also sends base ftlm/TPUfilms for manufacturing of PPFfilms and TPUfilms as raw materials.
2.4 In terms of the proposed arrangement, GPL supplies the inputs to the Applicant. On receipt of the same, GIL undertakes processes to convert mainly:-
1) Polyester Films and chemicals for manufacturing of Dyed film which is intermediate product of GPL to manufacture laminated film / Sun control Film;
2) Polyester films and chemicals for manufacturing of Thermostatic films (TS films) which is intermediate product to manufacture laminated film / Sun control Film; and
3) Polyester film, TPU and protection film for manufacture of PPF film.
2.5 In accordance with the Job Work Agreement, the title to the plain polyester film or any other inputs will vest with GPL. During the treatment/work on the Plain Polyester Films provided by GPL, the basic characteristics of the product are not lost. It is just a Different Commercial product.
2.6 Job work model involves following:-
1. Job work will be carried out by GIL.
2. Raw materials (such as Plain films, chemicals. Dyes and solvents, and TPU etc.) will be supplied by GPL for manufacturing Dyed Film, Laminated Films, TS Films and PPF Films.
3. GPL also provide utility such as Electricity, Furnace Oil required for Job Work.
4. Freight terms: Freight, unloading and loading charges, if any, will be borne by GPL.
5. Credit terms: GPL will pay all the dues to GIL within 30 days from the invoice date.
6. GPL will depute its technical representatives at GIL plant to provide support of technical supervision during the manufacturing process to ensure quality output.
B. STATEMENT CONTAINING APPLICANT’S INTERPRETATION OF LAW AND/OR FACTS
2.7 Vide Notification no. 20/2019 dated 30/09/2019 the Law was amended as follows:
“GST on manufacturing services on physical inputs (goods) owned by others:
(id) Services by way of job work other than specific entry: CGST @ 6%
(iv) Manufacturing services on physical inputs (goods) owned by others other than specifically Specified: CGST@ 9%”
2.8 on Which, circular no. 126/45/2019-GST dt. 22/11/2019 has clarified following:
“It pas been stated that the entry at item (id) under heading 9988 of Notification No. 11/2017- Central Tax (Rate) dated 28-06-2017 inserted with effect from 01-10-2019, prescribes 12% GST rate for all services by way of job work. This makes the entry at item (iv) which covers “manufacturing services on physical inputs owned by others” with GST rate of 18%, redundant.”
2.9 “As Per Sec. 2 (68) CGST Act, 2017, “Job work means any treatment or process undertaken by a person on goods belonging to another registered person and the expression job worker’ shall be construed accordingly.”
2.10 In view of the above, it may be seen that there is a clear demarcation between scope of the entries at item (id) and item (iv) under heading 9988 of Notification No. 11/2017- Central Tax (Rate) dated 28-06-2017. Entry at item (id) covers only job work services as defined in section 2(68) of CGST Act, 2017, that is, services by way of treatment or processing undertaken by a person on goods belonging to another registered person. On the other hand, the entry at item (iv) specifically excludes the services covered by entry at item (id), and therefore, covers only such services which are carried out on physical inputs (goods) which are owned by persons other than those registered under the CGST Act.
2.11 In Job- Work as per GST following 3 conditions needs to get fulfilled:-
(i) Treatment/Process should be undertaken by a person.
(ii) Such treatment/process should be on Goods.
(iii) These Goods should belong to another registered person.
2.12 In addition to above, Sec. 143(l)(a) of the CGST Act, 2017 requires bringing back of inputs after completion of Job-work or otherwise, within 1 Year of their being sent out to any place of business of the Principal.
2.13 As the above conditions are satisfied ACTIVITY UNDERTAKEN BY THE COMPANY AMOUNTS TO TREATMENT/PROCESS” and therefore it is proposed that service provided by GIL falls under the ambit of item (id) of heading 9988 of Notification No. 11/2017- Central Tax (Rate) dated 28-06-2017 because the service falls under the definition of Job-Work u/s 2(68) of CGST Act, 2017. Hence we can charge GST on the same at 12% GST rate.
Applicant’s Submission dated 23.06.2021:-
2.14 The above transaction as per Principal Notification No. 11/2017- Central Tax (Rate) dated 28-06-2017 was covered under residuary Entry 26(ii) “manufacturing services on physical inputs (goods) owned by others, other than (i)” above and accordingly charged GST @ 18%. There was no specific entry.
2.15 On 36/09/2019 CBIC issued Notification no. 20/2019 dated 30/09/2019 which led to addition of Entry at Item (id) “Services by way of Job Work other than (i), (ia), (ib) and (ic)” Applicable GST Rate 12% and Entry at item (iv) got amended as ”Manufacturing services on physical input (goods) owned other than (I)(ia), (ib), (ic), (id),(ii), (Ha) and (Hi) above” Applicable GST Rate 18%.
2.16 It has led to overlap between entry 26(id) and 26(iv) and therefore there arises a doubt in classification, for which subject application is filed.
In our view the above process gets covered under the definition of “Job Work” which means
“any Treatment or process undertaken by a person on goods belonging to another registered person”.
2.17 Looking at the above definition it is clear that, for a transaction to be Job Work three conditions should be satisfied-
a) Treatment/Process should be undertaken by a person;
b) Such Treatment/process should be on Goods; and
c) These Goods should belong to another registered person.
2.18 As the above conditions are satisfied it can be said the process is a Job Work Transaction. On combined reading of Entry (id) and Entry (iv) it was clear that both entry will cover situation where the manufacturing services is by way of Job Work or other than Job Work respectively.
2.19 To Clarify the above situation CBIC issued circular no. 126/45/2019-GST dt. 22/11/2019. It has been stated that the entry at item (id) under heading 9988 of Notification No. 11/2017- Central Tax (Rate) dated 28-06-2017 inserted with effect from 01-10-2019, prescribes 12% GST rate for all services by way of job work. This makes the entry at item (iv) which covers “manufacturing services on physical inputs owned by others” with GST rate of 18%, redundant.
2.20 However it may be seen that there is a clear demarcation between scope of the entries at item (id) and item (iv) under heading 9988 of Notification No. 11/2017- Central Tax (Rate) dated 28-06-2017. Entry at item (id) covers only job work services as defined in section 2 (68) of CGST Act, 2017, that is, services by way of treatment or processing undertaken by a person on goods belonging to another registered person. On the other hand, the entry at item (iv) specifically excludes the services covered by entry at item (id), and therefore, covers only such services which are carried out on physical inputs (goods) which are owned by persons other than those registered Under the CGST Act.
2.21 In The present case, GPL is a registered person under GST Act. Thus looking at the stated Clarification our transaction fall under Entry as item (id) ofNotification No. 11/2017- Central Tax (Rate) dated 28-06-2017 which reads as “Services by Job Work other than (i) (ia) (ib) and (ic) Above. Therefore rate of GST Applicable shall by 12 percent on the services by way of Job work by GIL to Garware Polyester Limited.
3. CONTENTION – AS PER THE CONCERNED OFFICER:
Officer Submissions dated 29.01.2021:-
3.1 M/s. Garware Industries Limited, the applicant, has provided services by way of Job-work to M/s. Garware Polyester Limited (GPL). GPL sends plain polyester films along with all other required inputs and applicant, after processing of Plain Polyester film and conversion into processed polyester films of all types (i.e. Dyed Films, Laminated Films, TS Films and PPF Films) and waste material returns back the said goods.
3.2 As per circular no. 126/45/2019-GST dt. 22/11/2019 is as under:
1. The entry at item (id) under heading 9988 of Notification No. 11/2017- Central Tax (Rate) dated 28-06-2017 inserted with effect from 01.10.2019, prescribes 12% GST rate for all services of Job-work.
2. The entry at item (iv) which covers “manufacturing services on physical inputs owned by others ” rate of 18%, is redundant.
3. The entries at items (id) & (iv) under heading 9988 read as under :
