Carbon Friction Strips Bonding to Metal is Job Work Services under SAC 9988

In re Oerlikon Friction Systems (India) Private Limited (GST AAR Tamilnadu)

In the realm of Goods and Services Tax (GST) in India, the classification of activities as either supply of goods or supply of services holds paramount importance for taxation purposes. The case of Oerlikon Friction Systems (India) Private Limited brings to light an intricate issue involving the bonding of carbon material friction strips to metal components. The query was whether this activity qualifies as a supply of service, specifically job work under Service Accounting Code (SAC) 9988. This article delves into the full text of the order by the Authority for Advance Ruling (AAR), Tamil Nadu, dissecting its implications for businesses engaged in similar activities.

Background of the Case

Oerlikon Friction Systems (India) Pvt. Ltd., situated in the SIPCOT Industrial Park, Tamil Nadu, sought clarity from the GST AAR on the nature of their service. The company is involved in bonding carbon friction material on metal components, a process critical for enhancing the durability and performance of automotive transmission systems. Given the technical sophistication and the use of imported materials, the classification of this activity under GST was contentious.

The company posited that their service should be classified under SAC 9988, which pertains to manufacturing services on physical inputs owned by others, arguing that this constitutes job work. The debate essentially revolved around whether the process of bonding carbon strips to synchronizer cores (metal components) supplied by the customers could be considered a supply of service or a composite supply involving goods.

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