Questions Sought by the applicant:
Whether building of body after utilizing and consuming owned materials and providing labour and further amount the same on chassis of the principal would amount to supply of Services?
Whether it would amount to a composite supply consisting a small part of supply of goods and major part of supply of services. Supply of Services being principal supply therefore on the basis of provision of Sec 8(a) of the CGST Act the same should be classified as supply of service under HSN. 9988?
Submission of the applicant:
As per the term defined us 2(68) of the CGST Act and as per para 3 of the CGST Act and as per para 3 of the schedule II of the CGST Act any treatment or process which is applied to goods of another persons is a supply of service As per Sec. 2(68) of the CGST ACT SGST Act.
The term job worker meaning treatment or process under taken by a persons on goods belonging to another registered persons and the expression job worker shall be construed accordingly 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 See. 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) determined 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.”
The Motor Vehicle is not complete without a body A chassis is semi finished goods and any treatment done by any other party on the chassis is the activity of job work Therefore it is supply of service and covered under HSN-9988 which attracts tax @ 18 % GST.
Facts & Findings – As per concerned Officer:
First of all we have to look upon the nature of work to be done by the job work. As per the submission the applicant the applicant intends to execute a contract of fabrication of body to be mounted on the chassis by a job worker. As per the term of the contract the chassis will be delivered by the applicant (Principal) for the purpose of carrying out the body building on the chassis on delivery challan to the job Worker The job worker shall procure various goods such as metal sheets, plywood, seats, glasses, aluminium sections etc, as inputs for fabricating the bus body besides fabrication services. Once the body is built and mounted on the chassis by the job worker, the vehicle will be sent back to the Principal/ the Applicant of the chassis after raising tax invoice towards body building charges on which GST will be charged separately. At no stage the ownership of the chassis will be transferred by the Principal to the job worker and body built thereon will be nature of job work
The job worker will claim the credit of GST paid on the material used as input against Output liability of GST on body building activity carried out by it. The consideration received by the job worker will be towards the manufacturing of the body on the chassis supplied by the Applicant(Principal).
In this connection first of all we have to see whether the nature of the work falls under the purview of “Job work or not. In this connection, it is relevant to refer explanation provided under section 143 of GST Act, 2017 which reads as under “For Purpose of job work, input includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or job worker”
Applicable GST rate for bus body building activity: Representations have been received seeking clarifications on GST rates on the activity of bus body building. The doubts have arisen on account of the fact that while GST applicable on job work services is 18%, the supply of motor vehicles attracts GST @ 28%.
In respect of the question raised by the applicant we hold that on mounting of Bus/ Truck/Ambulance body on the chassis to be supplied by the Principal on delivery challan or any other work charges including inputs required for such labrication work and in no case the ownership of owner of the chassis on which Bus/ Truck/Ambulance body will be fabricated by collecting job the chassis will be transferred by Applicant to the job worker will be taxable under SAC 998881
Motor vehicle and trailer manufacturing services and under entry no. 26(ii) as “Manufacturing services on physical inputs (goods) owned by other it is taxable @18%,
Similar Advance Rulings on building and mounting of the body on the chassis:-