2018 (10) TMI 1044 - AAR - GST

Classification of supply - supply of goods or not? - job-work or not? - As per the application it is mentioned that, the chassis ownership is not transferred and hence it should be classified under job work. Whether the activity of building and mounting of the body on the chassis by the Applicant will result in supply of goods under HSN 8707 or supply of services under HSN 9988? Held that - GST law does not distinguish between raw material, finished goods and semi-finished goods. It talks about input and Capital goods. Even, semi-finished goods or intermediates are goods and in turn Input by the principal or the job worker - the argument of the applicant that they use their own material, hence, they should not be treated as job worker is not tenable under the provision of law. Bus body builder builds body on chassis provided by the principal for body building, and charges fabrication charges (including certain material that was consumed during the process of job-work) - fabrication of body on chassis provided by the principal (not on account of body builder), the supply would merit classification as service, and 18% GST as applicable will be charged accordingly. Ruling - The Activity of building and mounting of the body on the chassis provided by the principal under FOC challan will result in supply of services under HSN 9988 and hence, should be taxed @ 18% GST.

Summary

Issues Involved:
1. Determination of whether the activity of building and mounting the body on the chassis constitutes a supply of goods under HSN 8707 or a supply of services under HSN 9988.

Analysis:
The case involved a query regarding the classification of the activity of building and mounting the body on a chassis as either a supply of goods or a supply of services. The applicant, an automobile corporation, received chassis from OEMs on a Free of Cost (FOC) basis and carried out body building on the chassis using their own procured materials. The fully built vehicles were then sent back to the OEMs/customers after payment of GST. The central issue was whether this activity falls under HSN 8707 (goods) or HSN 9988 (services).

The applicant contended that since they used their own inputs and the chassis ownership was not transferred, the activity should be classified as job work, which involves the use of both self-procured goods and goods received from the principal. However, the authority referred to the definition of job work under the CGST and SGST Act, which includes any treatment or process on goods belonging to another registered person. The authority also highlighted the provision that any treatment or process applied to another person's goods is considered a supply of service.

The authority emphasized that the distinction between raw materials, finished goods, and semi-finished goods is not relevant under GST law, as it focuses on inputs and capital goods. The judgment cited a previous case to support the argument that the addition or application of items by a job worker does not change the nature of their work. Additionally, the authority clarified that if the bus body builder works on a chassis owned by them, it constitutes a supply of goods attracting 28% GST, while working on a chassis provided by the principal for body building is classified as a service with 18% GST.

In conclusion, the Advance Ruling Authority determined that the activity of building and mounting the body on the chassis provided by the principal under FOC challan should be classified as a supply of services under HSN 9988, subject to 18% GST.

This detailed analysis considered the legal provisions, previous judgments, and the specific circumstances of the case to arrive at a comprehensive decision regarding the classification of the activity in question.