In re M/s. Sanghi Brothers (Indore) Private Limited (GST AAR Madhya Pradesh)
Mounting of Bus/ Truck /Ambulance body on the chassis to be supplied by the Principal on delivery challan or any other owner of the chassis on which Bus/ Truck /Ambulance body will be fabricated by collecting job work charges including inputs required for such fabrication work and in no case the ownership of 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%(9% under CGST and 9% under SGST Act).
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MADHYA PRADESH
1. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and MP Goods & Services Tax Act, 2017 (hereinafter also referred to CGST Act and SGST Act respectively) by M/s. Sanghi Brothers(Indore) Private Limited hereinafter referred to as the Applicant) , registered under the Goods & Services Tax.
2. The provisions of the CGST Act and MPGST Act are identical, except for certain provisions. Therefore, unless a specific mention of the dissimilar provision is made, a reference to the CGST Act would also mean a reference to the same provision under the MPGST Act. Further, henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or MP GST Act would be mentioned as being under the GST Act.
3.
4. BRIEF FACTS OF THE CASE:
3.1 The Applicant is registered with the Department having GSTIN 23AAKCS3060PIZ1 and is engaged in Trading activity of Motor Vehicles a complete vehicle with bodiy duly fitted in the form of Truck, Buses and other complete vehicle by charging tax @ 28%in tax invoice.
3.2. The applicant is giving chassis of the bus/truck on FOC basis under the cover of delivery chalan to a body builders namely M/s. Arpijay Fabricators Pvt.ltd, whose works is situated at Pithampur Dist Dhar and registered vide GSTN 23AAECS9992CIZS known as job worker.
3.3 The job worker is building bodies of various vehicle over the chassis provided by the principal on job work basis. Job worker is doing job work on the goods belonging to principal and accordingly above transaction is covered under service category. Though during the course of body building some tangable and non tangable material have been used. The job worker sent back fully built vehicles to the principal and billed for the same after charging GST @ 28%.
3.4 The consideration received by the job worker is towards the building of bus bodies by using its own procured material and mounting of the body on the chassis supplied under FOC chalan by the principal.
3.5. The applicant’s contention is that job worker is charging tax at higher rate i.e. 28%. Since it is a composite supply consisting of a small part of supply of goods and major part of supply of services. As per the provisions of Sec. 8(a) of the CGST Act the same should be classified as supply of services under HSN — 9988.
4. QUESTIONS RAISED BEFORE THE AUTHORITHY:-
The following questions have been posted before the Authority in the application:-
4.1 “Whether building of body after utilizing and consuming owned materials and providing labour and further amounting the same on chassis of the principal would amount to supply of Services”.
4.2 “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”
However during discussion the applicant reframed the question raised as following :
Whether mounting of Bus/ Truck /Ambulance Body by the job worker on the chassis supplied by the principle for which the job worker charged fabrication charges including cost of certain material that was consumed during the process of job work. would amount composite supply in which supply of service being principal supply therefore on the basis of provision of Sec. 8(a) of the CGST Act the same would be classified as supply of service under HSN 9988″ The complete vehicle i.e the chassis and mounted body is sent back to the principle (no where the ownership is transferred to the job worker )
5. CONCERNED OFFICER’S VIEW POINT:
The Concerned Officer Submitted that the rate of tax on the nature of work undertaken by the applicant will attract 18% GST as per circular no. 52/26/2018-GST issued by CGST.
6. RECORD OF PERSONAL HEARING:
6.1 C.A. S.C. Bansal, Authorised Representativeof the applicant for personal hearing the submissions already made in the application. The Applicant states that —
As per the term defined u/s 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 means” “any 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 Sec. 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,”
6.2. 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.
As per the provision of job work the job worker can use his own goods for providing the service of job work in addition to the goods received from principal.
In this connection it is relevant to refer explanation provided u/s 143 of CGST Act which reads as under:-
“For the purpose of job work input includes intermediate goods arising from any treatment of process carried out on the inputs by the principal or job worker”
As per the ratio of the judgement held in case of Prestige Engineering (India) ltd VS CCE on Merut ( 1994(73) ELT 497 (SC) addition or application of items by job worker would not detract from the nature and character of his work. Here it would be worthwhile to explain process of body building. being undertaken by the body builders.
6.3. Process of Body Building and mounting the same on chassis is as under:-
For fabrication of bus body, the builder first make the pipe structure and mount the same on the chassis. Outer panelling is done with GP sheets and interior panelling with colour coated G.P. Sheets. Flooring with chequered plywood. After primer painting the final coat of paint is applied. In this case body is not made separately but is fabricated on chassis itself. Body requirement differ from party to party.
It can not be treated as process of manufacturing merely because job worker is using its own inputs.
GST Law does not distinguish between raw materials, finished goods and semi finished goods. It talks about “input “and and capital goods. Even semi finished goods or intermediates are and in turn input by the principal or job worker.
Therefore merely because job worker is using its own input it is not job work. This is not according to the provisions of GST Law.
From the above process one can reach to the conclusion that Fabrication and other work is done on chassis itself . It is not the case that any readymade body is fitted on chassis given by the owner.
The ownership of chassis always remains with the applicant company who has given chassis for building and mounting of body on job work. Because it fulfils the main important condition of the definition of job work i.e. process undertaken on goods belonging to another registered persons . The whole process of body building and mounting is performed on the goods (Chassis) belonging to the applicant therefore it is purely job work. Once it is established that it is a job work then it is supply of service. Even if it is composite supply of goods and services. The predominant intention of the principal is to get services . Utilizing and consuming tengible and non tengible goods is incidental to main/principal supply and therefore as per the provision of Sec. 8(a) in case of composite supply tax is being levied at the rate applicable to principal supply . In this case the principal supply is supply of service. Thus, it should be classified as services and tax is @ 18% under CGST Act.
6.4. Here it is also important to note that principal is charging @ 28%GST under HSN Code 8707 on supply of a complete vehicle but body building for him is a receipt of service and duly covered under HSN Code 9988 where the rate of tax is applicable @ 18% under GST Law.
The circular No 34/8/2018/GST dated 1st March 2018 issued by the Govt’ of India Ministry of Finance has clarified the matter as under:-
