2019 (4) TMI 73 - AAR - GST

Classification of supply - Job work - Mixing of rubber compound on the materials supplied by the principal and returning the finished products to the principal - whether classified under Sl.No.26(i)(b) of 11/2017 (Central Tax (Rate)) and SRO.No.370/2017. Held that - The materials supplied for execution of job work are falling under Chapter 50 to 63 in the First Schedule to the Customs Tariff Act, 1975. The materials like textile, carpets, coir etc. are supplied by the principal for executing job works along with moulds in the required designs. All the raw materials supplied by are covered under Chapter 50 to 63 of the Customs Tariff Act, 1975. Therefore the job work services applied on such goods are squarely come under Sl.No. 26(i)(b) of Notification 11/2017 and taxable @ 5% GST.

Summary

Issues Involved: Advance ruling on whether mixing rubber compound on materials supplied by principal and returning finished products to the principal falls under Sl.No.26(i)(b) of Notification 11/2017-(Central Tax (Rate)) and SRO.No.370/2017.

The judgment analyzed the petitioner's activities as a manufacturer and supplier of rubber-backed mats and mattings, including job work where materials are supplied by the principal. The process involves cutting materials to size, mixing with molten rubber compound, and vulcanizing with a hydraulic press before delivering the finished products to the principal. The petitioner sought clarification on whether these activities fall under Sl.No.26(i)(b) of Notification 11/2017. The authorized representative argued that job work services on goods owned by others are considered services under SAC 9988, and the goods supplied by the principal are taxable at 5% GST under specific HSN codes. The Circular No.38/12/2018 clarified that job workers can use their goods in addition to those received from the principal, and the value of services is based on service charges, not the value of goods manufactured. The ruling considered that job work involves treating or processing goods owned by another registered person, and the job worker is liable to pay GST if registered, issuing invoices at the time of service supply.

The judgment further elaborated that the materials supplied for job work fall under specific chapters in the Customs Tariff Act, and since all raw materials provided by the principal are covered under these chapters, the job work services applied to such goods fall under Sl.No.26(i)(b) of Notification 11/2017, taxable at 5% GST. Consequently, the ruling concluded that mixing rubber compound on materials supplied by the principal and returning finished products like rubber-backed mats and mattings constitute the supply of job work services falling under the specified notification and rate.

In conclusion, the judgment clarified that the activities of mixing rubber compound on materials supplied by the principal and returning finished products to the principal are considered job work services under the relevant notification and are taxable at 5% GST. The ruling emphasized the importance of understanding job work processes, the liability for GST payment, and the invoicing requirements for job work services provided by the petitioner in this case.