12% GST applicable on job work done on goods owned by other registered persons

The AAR, Gujarat in Shree Avani Pharma [Advance Ruling No. GUJ/GAAR/R/2023/32 dated November 03, 2023] ruled that, service of job work provided by the Applicant would fall within the purview of Sr. No. 26(id) of the Notification No. 11/2017-CT (Rate) dated June 28, 2017  and Heading SAC 9988 and the Applicant therefore, is liable to pay GST at the rate of 12 percent.

Facts:

Shree Avani Pharma (“the Applicant”) is a partnership firm engaged in the business of providing job work services of converting raw material into finished product for the client who are registered under GST. During the job work, ownership of the goods does not change which remains with the client.

The Applicant has filed Advance Ruling Application on the question whether the job work service provided by the Applicant falls within the purview of entry Sr. No. 26 of Notification No. 11/2017-CT (Rate) dated June 28, 2017 (“the Notification”), as amended vide Notification No. 20/2017-CT(Rate) dated September 30, 2019 and Heading SAC 9988 and therefore, is liable to pay GST at the rate of 12 percent i.e. six percent CGST and SGST each.

Issue:

Whether Twelve percent GST would be applicable on job work done on goods owned by other registered persons under GST?

Held:

The AAR, Gujarat in Advance Ruling No. GUJ/GAAR/R/2023/32 held as under:

• Observed that, the description of heading 9988 is manufacturing services on physical inputs (goods) owned by others. As per Section 2(68) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) Job Work is defined as any treatment or process undertaken by a person on goods belonging to another registered person.
• Noted that, as per the joint reading of Notification along with Circular No. 126/45/2019-GST dated November 22, 2019, the entry Sr No. 26(id) of the Notification would be applicable in cases where the job work is done on goods belonging to another registered person whereas the Sr. No. 26(iv) being residual entry covers job work done on goods belonging to unregistered person.
• Ruled that, service of job work provided by the Applicant would fall within the purview Sr. No. 26(id) of the Notification and Heading SAC 9988 and the Applicant therefore, is liable to pay GST at the rate of 12 percent.

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