2018 (10) TMI 1516 - AAR - GST

Levy of GST - Job-work - supply or not - supply of Re-gasified Liquefied Natural Gas (RLNG), de-mineralized water (DM Water), Hydrogen Rich off Gas and raw water etc - applicability of Section 143 of GST - buy back of Hydrogen, Nitrogen and Steam (Industrial Gases) without payment of GST. Held that - It is settled position of law job work is activity which may or may not tantamount to manufacture. A job worker may undertake manufacturing of goods on account of others from the inputs supplied to him free of cost, and realize job work charges on return of the goods so manufacture or processed. In such a scenario the job worker alone has the liability to pay tax on the job work charges realized. The essential requirement to be fulfilled to establish a transaction as job work is the treatment or process undertaken on the goods belonging to another. Section 143 of GST Law explain the procedure to be followed in the case job work transaction. A registered taxable person may, under intimation send any inputs without payment of tax to a job worker or Job-work and bring back Inputs after completion of job work or otherwise, within one year of their being sent out, to any of the place of business without payment of tax. In the present case, the industrial gases are produced out of the major materials or inputs supplied by the applicant. The job worker uses some minor, ancillary goods to complete the process. The application of minor items by the job worker would not detract it being a job. Therefore the processing undertaken by M/s. Prodair Air Products on the goods belong to the applicant, another registered person qualifies as job work even if it amounts to manufacture - The transport of the inputs from principal for processing through pipe lines to the premises of job worker as well as return of processed goods after job work to the principal can t be treated as taxable supply. Ruling - The activity of the applicant of sending Regasified Liquefied Natural Gas (RLNG), De-Mineralized Water (DM Water), Hydrogen Rich off Gas and Raw water free of cost to M/s. Prodair Air Products Pvt. Ltd. For manufacture of Hydrogen, Nitrogen and Steam manufactured out of its amount to job work as defined under Section 2(68) read with Section 143 of the CGST/ KSGST Acts.

Summary

Issues involved:
1. Whether certain inputs can be sent by the applicant to another party without payment of GST under job work provisions.
2. Whether certain industrial gases can be bought back by the applicant from the other party without payment of GST under job work provisions.

Analysis:

Issue 1:
The applicant, a public sector undertaking operating an oil refinery, sought an advance ruling on whether specific inputs such as Re-gasified Liquefied Natural Gas (RLNG), De-mineralized water (DM Water), Hydrogen Rich off Gas, and raw water can be sent to another party for processing without payment of GST under job work provisions. The applicant supplies these inputs free of cost to the other party, which processes them into industrial gases. The key input RLNG falls outside the ambit of GST. The other party collects processing charges along with GST and returns the processed industrial gases to the applicant. The authority examined the scenario and ruled that this activity falls within the definition of job work as per GST laws. The movement of inputs and processed goods between the parties does not constitute a taxable supply under GST.

Issue 2:
The second issue raised was whether the applicant can buy back Hydrogen, Nitrogen, and Steam (industrial gases) from the other party without payment of GST under job work provisions. The authority analyzed that the industrial gases are produced using materials supplied by the applicant, and the other party uses minor ancillary goods in the process. Despite some manufacturing involved, the processing by the other party qualifies as job work. Therefore, the transport of inputs for processing and the return of processed goods to the applicant are not considered taxable supplies under GST. The ruling stated that the activity of sending inputs to the other party for manufacturing industrial gases and receiving them back falls under the definition of job work as per GST laws.

In conclusion, the authority determined that the activities described by the applicant regarding the processing of inputs into industrial gases and their subsequent procurement without payment of GST under job work provisions are in compliance with the CGST/KSGST Acts. The rulings provided clarity on the tax implications of such transactions and affirmed that the movements of inputs and processed goods between the parties do not attract GST.