In re Amruta Fettlers (Sayaji Baburao Solase) (AAR Maharashtra)
In the case of In re Amruta Fettlers (Sayaji Baburao Solase), the Maharashtra Authority of Advance Ruling (AAR) addressed two questions concerning the Goods and Services Tax (GST) classification and rate applicable to the applicant’s shot blasting activity. Amruta Fettlers conducts shot blasting on castings belonging to their customer, M/s. GPI. This activity takes place within M/s. GPI’s premises, utilizing Amruta Fettlers’ own shot blasting machine, steel shots, and labor. The charges for this service are on a per-piece basis. Prior to the clarification, Amruta Fettlers applied an 18% GST rate on these services. However, following the insertion of clause (id) into Sr. No. 26 of Notification No. 11/2017-CT(R) on June 28, 2017 (which was subsequently amended, notably by Notification No. 20/2019 effective from September 30, 2019), M/s. GPI proposed that the activity should be classified as job work, thereby attracting a reduced GST rate of 12%. The applicant’s argument rested on the definition of “job work” as per Section 2(68) of the Central Goods and Services Tax (CGST) Act, 2017, which states that job work means “any treatment or process undertaken by a person on goods belonging to another registered person.” Amruta Fettlers asserted that their shot blasting activity perfectly fits this definition as it involves processing castings owned by a GST-registered entity (M/s. GPI), without transfer of ownership. They further cited various CESTAT rulings under the prior Service Tax regime that recognized similar intermediate processes carried out on customer goods within the customer’s premises as job work. Consequently, the applicant maintained that their service should be classified under SAC 9988 as job work and be subject to the 12% GST rate as per the amended Notification No. 11/2017-CT(R)
The Concerned Officer for the matter concurred with the applicant’s interpretation. The officer elaborated that while the term “manufacture” under Section 2(72) of CGST, 2017 implies the emergence of a new product with distinct name, character, and use, the shot blasting activity does not result in a new product; the processed items remain castings. Instead, the officer noted that the activity precisely aligns with the definition of “job work” under Section 2(68) of the CGST Act, as it involves a treatment or process undertaken by Amruta Fettlers on goods belonging to M/s. GPI, a registered person. Therefore, the officer supported the classification of the service as job work under SAC 9988, which encompasses “manufacturing services on physical inputs owned by others,” and specifically under item (id) of Notification No. 11/2017-CT(R), which prescribes a 12% GST rate for such services effective from October 1, 2019. The AAR’s observations confirmed the factual details, including the presence of Amruta Fettlers’ machine at GPI’s site and the usage of Amruta Fettlers’ materials and labor. The Authority meticulously examined the provisions of Notification No. 11/2017-CT(R), particularly distinguishing between clause (id) and clause (iv) under Heading 9988. It referred to Circular No. 126/45/2019-GST dated November 22, 2019, which clarifies that entry (id) applies to job work services as defined in Section 2(68) – i.e., treatment or processing on goods belonging to a registered person. Conversely, entry (iv) covers manufacturing services where inputs are owned by unregistered persons. Given that M/s. GPI is a registered entity and the ownership of the castings remained with them throughout the process, the AAR concluded that Amruta Fettlers’ activity falls squarely within the scope of job work under entry (id).
Based on the thorough examination of the facts, the legal definitions, and relevant notifications and circulars, the Authority of Advance Ruling definitively concluded that the shot blasting activity carried out by Amruta Fettlers on M/s. GPI’s castings is indeed classifiable as a job work service under SAC 9988. The ruling explicitly affirmed that this service falls within the ambit of entry Sr. No. 26 (id) of Notification No. 11/2017-CT(Rate), as amended, and is therefore subject to a 12% GST rate (comprising 6% CGST and 6% SGST) with effect from October 1, 2019. Both questions posed by the applicant were answered in the affirmative, aligning with the submissions of both Amruta Fettlers and the Jurisdictional Officer. This decision provides clarity on the GST implications for such specific processing activities conducted by job workers on goods owned by registered principals, even when the activity occurs within the principal’s premises.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MAHARASHTRA
