2019 (10) TMI 558 - AAR - GST

Levy of GST - job work charges charged for manufacturing of Cattle Feed / Poultry Feed on job work basis - scope of supply - HELD THAT - In the present case. the applicant undertakes process on goods belonging to the principal. the same is in the nature of job work and the applicant is a job worker, the activity of manufacturing Cattle Feed / Poultry Feed by the applicant from the raw material supplied by the other registered person shall be considered as supply of services. The applicant, thus, undertakes this supply of services by way of processing the goods supplied by the principal for a consideration and the same is covered under the definition of Supply. The Crucial term which determines the issue in hand, is intermediate production process as job work in relation to rearing of all life forms of animals. From the facts of the case in hand, the activity of manufacturing of Cattle Feed / Poultry Feed by the applicant (on job work basis) is not an activity of carrying out an intermediate production process as job work in relation to Cultivation plants and/or rearing of all life forms of animals. Job Work is defined under Section 2(68) as any treatment or process undertaken by a person on goods belonging to another registered person. In the present case, the material received by the applicant from the principal manufacturer are subjected to certain processes and returned back to the Principal manufacturer. Thus. the activity carried out by the applicant falls under Heading 9988 and not under Heading 9986 as contended by the applicant. The applicant realizes job work charges on return of goods so manufactured by it. In such a scenario. the applicant (job worker) alone has the liability to pay any tax liable on the job work charges. Thus, the activity of job work being undertaken by the applicant Clearly falls under S.No. 26 (g) of the N/N. 11/2017- Central Tax (Rate) dated 28 06.217 (as amended) and thus attracts GST@ 5%.

Summary

Issues Involved:
1. Applicability of GST on job work charges for manufacturing Cattle Feed/Poultry Feed.
2. Classification of services provided by the applicant under GST.

Detailed Analysis:

Issue 1: Applicability of GST on Job Work Charges for Manufacturing Cattle Feed/Poultry Feed

The applicant, engaged in manufacturing Cattle Feed and Poultry Feed on a job work basis, receives raw materials from the principal manufacturer. The applicant sought an advance ruling on whether GST is applicable on the job work charges for manufacturing these feeds.

Issue 2: Classification of Services Provided by the Applicant under GST

Eligibility for Advance Ruling:
The application was considered eligible for advance ruling under Section 97(2) of the CGST Act, 2017, and the PGST Act, 2017, specifically under clauses (a) and (b) concerning the classification of goods or services and the applicability of a notification.

Applicant's Submissions:
The applicant argued that their services fall under "Support services to agriculture, forestry, fishing, animal husbandry" which are NIL rated as per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. They cited that carrying out an intermediate production process as job work in relation to cultivation of plants and rearing of all life forms of animals (except horses) for food, fibre, fuel, raw material, or other similar products is also NIL rated.

Discussion and Findings:

1. Nature of Services:
- The applicant's activity involves processing raw materials supplied by the principal manufacturer and returning the finished goods (Cattle Feed/Poultry Feed). This qualifies as job work as defined under Section 2(68) of the CGST Act, which involves any treatment or process undertaken on goods belonging to another registered person.

2. Supply Definition:
- As per Section 7(1) of the CGST Act, the applicant's activities constitute a supply of services, which includes all forms of supply of goods or services for a consideration in the course or furtherance of business.

3. Job Work Classification:
- The services provided by the applicant do not fall under "Support services to agriculture, forestry, fishing, animal husbandry" as defined in the Notification. Instead, they are classified as manufacturing services on physical inputs (goods) owned by others under SAC 9988.

4. Relevant Notification and Rates:
- The appropriate classification for the applicant's services is under SAC 9988, specifically under S.No. 26 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, which covers manufacturing services on physical inputs owned by others, including prepared animal feeds manufacturing services. This attracts GST at the rate of 5% (CGST 2.5% + SGST 2.5%).

Ruling:
The activity of manufacturing Cattle Feed/Poultry Feed by the applicant on a job work basis is not classified as "Support services to agriculture, forestry, fishing, animal husbandry." Instead, it falls under heading 9988 and attracts GST at 5% (CGST 2.5% + SGST 2.5%).