2019 (7) TMI 41 - AAR - GST

Classification of supply - supply of goods or supply of services - Job-work or not - activity of building and mounting of the body by the applicant on the chassis provided by the Principle - whether it amounts to supply of goods under HSN 8707 or supply of services under HSN 9988 taxable @ 18% irrespective of end use by the principle who shall effect the sale of Bus ? - HELD THAT - In the instant case the Applicant shall procure various goods such as metal sheets, plywood, seats, glasses, aluminium sections etc. as inputs for fabricating the bus body besides fabrication services. Once the Bus body is built and mounted on the chassis by the Applicant, the vehicle will be sent back to the OEMs/customers after raising tax invoice towards body building charges on which GST will be charged separately. At no stage the ownership of the chasis will be transferred by the OEMs to the Applicant. The applicant will claim the credit of GST paid on the material used as input against output liability of GST on body building activity carried out by it. The consideration received by the applicant will be towards the manufacturing of the bus body on the chassis supplied by the Principal. 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 intermediate are goods and in turn Input by the Principal or by the worker - So the argument of the applicant that the nature of the work stated in the application should be falls under job work is tenable under the provision of the Law. Whether the activity of building, fabricating and mounting of the bus body by the applicant on the chassis provided by the Principle will result in supply of goods under HSN 8707 or supply of services under HSN 9988 taxable @ 18% irrespective of end use by the principle who shall effect the sale of Bus? - HELD THAT - The activity and question raised before us has been suitably clarified and dealt with Circular no. 52/26/2018-GST issued by Government of India, Ministry of Finance, Department of Revenue dated 9 th August,2018 wherein it is clarified that the supply made is that of bus, and accordingly supply would attract GST @28%. In the case as mentioned at Para 12.2(b) above, fabrication of body on chassis provided by the principal (not on account of body builder), the supply would merit classification as service, and GST as applicable will be charged accordingly. Thus on fabrication of bus body on the chassis to be supplied by the OEMs(Principal) on delivery challan or any other owner of the chassis on which bus 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 Principal to the applicant 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).

Summary

Issues Involved:
1. Classification of the activity of building and mounting bus bodies on supplied chassis.
2. Determination of whether the activity constitutes a supply of goods or services.
3. Applicable GST rate for the activity.

Issue-wise Detailed Analysis:

1. Classification of the Activity:
The applicant, M/s. Rohan Coach Builders, intends to fabricate bus bodies on chassis supplied by OEMs (Original Equipment Manufacturers). The chassis will be delivered to the applicant for body building on a delivery challan, and the applicant will procure various inputs such as metal sheets, plywood, seats, glasses, and aluminum sections for the fabrication. The applicant will then send the completed bus back to the OEMs/customers after raising a tax invoice for the body building charges, on which GST will be charged separately. The ownership of the chassis remains with the OEMs throughout the process, making the activity a "job work."

2. Supply of Goods or Services:
The applicant sought an advance ruling to determine whether the activity of building and mounting bus bodies on the chassis provided by the OEMs constitutes a supply of goods under HSN 8707 or a supply of services under HSN 9988, taxable at 18%. The applicant argued that since the chassis ownership is not transferred and the body building involves using their inputs, the activity should be classified as "job work" under SAC 998881 - "Motor vehicle and trailer manufacturing services" and taxed at 18%.

The applicant referred to Section 2(68) of the CGST and SGST Acts, which defines job work as any treatment or process undertaken by a person on goods belonging to another registered person. Additionally, Para 3 of Schedule II of the CGST Act specifies that any treatment or process applied to another person's goods is a supply of service. The applicant also cited previous rulings and circulars, including Circular No. 52/26/2018-GST, which clarifies that the fabrication of bus bodies on chassis provided by the principal is a supply of services, taxable at 18%.

3. Applicable GST Rate:
The concerned officer and the applicant agreed that the nature of work undertaken by the applicant attracts 18% GST as per Circular No. 52/26/2018-GST. The circular outlines two scenarios: (a) when the bus body builder builds a bus on a chassis owned by them and supplies the complete bus, attracting 28% GST; and (b) when the bus body builder fabricates the body on a chassis provided by the principal, which is classified as a service and attracts 18% GST.

The authority examined the submissions and found that the applicant's activity falls under scenario (b) of the circular. The fabrication of the bus body on the chassis provided by the principal is classified as a service under HSN 9988, and the applicable GST rate is 18%.

Ruling:
The authority ruled that the fabrication of bus bodies on chassis supplied by the OEMs or any other owner, where the ownership of the chassis is not transferred to the applicant, constitutes a supply of services under SAC 998881 - "Motor vehicle and trailer manufacturing services." This activity is taxable at 18% GST (9% CGST and 9% SGST). The ruling is valid subject to the provisions under Section 103(2) until declared void under Section 104(1) of the GST Act.