2018 (8) TMI 284 - AAR - GST

Classification of Supply - activity of Body Building on the chasis supplied by the Principal, which is undertaken as a job work - utilising and consuming tangible material from their (Applicant s) end for fulfilling the job work. Whether the supply is to classified as supply of goods or supply of services? - Held that - In the case of bus body building there is supply of goods and services. Thus, classification of this composite supply, as goods or service would depend on which supply is the principal supply which may be determined on the basis of facts and circumstances of each case - the activity of Body Building undertaken by the Applicant, carried out on the chassis supplied by the principal in the capacity of a job worker, would amount to Composite Supply as define under CGST Act 2017/MPGST Act 2017. What would be the appropriate classification and applicable rate of tax for the above transaction? - Held that - The classification in case of a composite supply has to be arrived at on the basis of predominant element of a composite supply, which in turn would be the Principal Supply. Needless to say that as per the definitions envisaged under the statute the predominant component of the composite supply involved in the activity of Body Building would determine the rate of tax applicable on such composite supply. In case the Goods part is predominant, then the Composite Supply in this case would be governed by Chapter 87 depending upon the nature of body being built by the Applicant on the chasis supplied by the principal. In case, the Service part is predominant in the composite supply, then the rate of tax would be applicable as per Heading No.9988 - Due to incomplete information provided by the Applicant, the Authority finds itself constrained to provide any definitive ruling on this aspect. Ruling - The activity of Body Building undertaken by the Applicant, carried out on the chasis supplied by the principal in the capacity of a job worker, would amount to Composite Supply as define under CGST Act 2017/MPGST Act 2017. The rate of tax on such Composite Supply would be determined by the predominant component involved in such Composite Supply in terms of Section 8(a) of the CGST Act 2017, depending upon the character of the body being built on the chasis, which would eventually be classifiable under Chapter 87 of the Tariff. On the other hand, if the predominant element happens to be the Service part, then the Principal supply would be classified under Heading no.9988.

Summary

Issues: Classification of activity as supply of goods or services, Appropriate classification and tax rate for the transaction

Classification as Supply of Goods or Services:
The Authority for Advance Rulings, Madhya Pradesh, addressed the query regarding the classification of the activity of Body Building undertaken by the Applicant as a supply of goods or services. The Applicant, engaged in building bodies of various vehicles on a job work basis, consumes their own material during the process. The Applicant contended that their activity falls under the service category as they work as a job worker. The Department's viewpoint highlighted that in the case of bus body building, there is a supply of both goods and services, and the classification of the composite supply depends on which supply is the principal one. The Applicant presented their case during the personal hearing, emphasizing that the supply should be considered a composite supply of goods and services with a predominant intention of receiving services.

Appropriate Classification and Tax Rate:
The Authority analyzed the submissions made by the Applicant, referring to Circular No.34/08/2018-GST, which clarified that in bus body building, there is a supply of goods and services, and the classification as goods or services depends on the principal supply. The Authority concluded that the activity undertaken by the Applicant should be treated as a 'Composite Supply' as defined under the CGST Act 2017 and MPGST Act 2017. The tax liability on a composite supply, as per Section 8(a) of the CGST Act 2017, is based on the principal supply, which is the predominant element of the composite supply. The Applicant's argument regarding the classification based on the predominant intention of the buyer was deemed misplaced, as the classification should be based on the predominant element of the composite supply. However, due to incomplete information provided by the Applicant, the Authority could not definitively rule on the tax rate applicable to the composite supply.

Ruling:
1. The Authority ruled that the activity of Body Building undertaken by the Applicant, as a job worker on the chasis supplied by the principal, constitutes a 'Composite Supply' as defined under the CGST Act 2017/MPGST Act 2017.
2. The tax rate on such Composite Supply would be determined by the predominant component involved in the supply, either goods or services, as per Section 8(a) of the CGST Act 2017. Depending on the nature of the body being built on the chasis, the supply would be classifiable under Chapter 87 of the Tariff for goods or under Heading no.9988 for services.