2020 (1) TMI 791 - AAR - GST

Classification of activity - bus body building activity on the chassis provided by the principal as service - Circular No. 52/26/2018-GST dated 09.08.2018 - whether the classification bus body building activity on the chassis provided by the principal as service be extended to their activity of body building of tippers trailers etc. as per Para No. 12.1 12.2(b) and 12.3 of Circular No. 52/26/2018-GST dated 09.08.2018 as their activity also is akin to the one referred to in the said Circular. HELD THAT - The applicant in the instant case is also involved in the same activity of body building but not on the chassis of bus. They fabricate the body on the chassis provided by the principal for Tippers Trailers etc. - It is an admitted fact that the applicant at present is charging GST @ 28% on treating their supply as that of goods though the invoice is raised for fabrication of body building on (the vehicle) and the actual activity of supply is fabrication of body. Therefore the activity of the applicant is akin to that of the one mentioned in the Circular. The activity of the applicant qualifies to be classified as Service subject to fulfillment of conditions enumerated at para 5.4 and also the vehicle on whose chassis the body is built must fall under Chapter 87. Classification of services - applicant contends that their services are covered under Service Code 998881 titled as Motor vehicle and trailer manufacturing services - HELD THAT - As per the said explanatory notes the service code 998881 includes motor vehicle manufacturing services trailers and semitrailer manufacturing services and motor vehicle parts and accessories manufacturing services. The applicant is involved in manufacturing / fabrication of trailers etc. and hence their activity merits classification under Service Code 998881. Rate of tax on the services - HELD THAT - The impugned services of the applicant are covered under heading 9988 as manufacturing services on physical inputs (goods) owned by others in terms of SI.No.26(ii) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 initially and subsequently under SI.No.26(iii) / (iv) respectively consequent to amendment of the said entry No.26(iv) of the aforesaid Notification. However the services by way of Job work in relation to bus body building have been carved out of the earlier entry i.e. SL.No.26(iv) of Notification supra and a separate entry under SI.No.26 (i) (ic) has been incorporated consequent to amendment of the said notification vide Notification No.20/2019-Central Tax (Rate) dated 30.09.2019. It is clearly evident that the applicant inadvertently claimed that their services are covered under entry of the Notification No.11/2017-CT (R) which attract 12% GST (6% CGST 6% SGST) whereas actually they are covered under of the said Notification and attract 18% GST (9% CGST 9% SGST).

Issues:
1. Correct GST rate for the applicant's services.
2. Applicability of SAC 998881 for classification of services.
3. Appropriate GST rate for the applicant's services post-amendment.

Issue 1: Correct GST rate for the applicant's services

The applicant sought clarification on whether charging GST at 28% (CGST @ 14% + SGST @ 14%) as per Sl.No. 169 of Schedule-IV to the Notification No.1/2017-CT (R) dated 28.06.2017 was correct. The Authority analyzed the activity of the applicant, which involved body building on chassis provided by the principal for Tippers, Trailers, etc. The Authority noted that the applicant's activity was similar to bus body building as per Circular No. 52/26/2018-GST dated 09.08.2018. The Authority referred to a government notification that clarified "bus body building" to include building bodies on chassis of vehicles under Chapter 87. Consequently, the applicant's activity qualified as a service, subject to meeting specific conditions. Therefore, the correct GST rate for the applicant's services was determined to be 28%.

Issue 2: Applicability of SAC 998881 for classification of services

The second issue pertained to the classification of the applicant's services under SAC 998881, titled "Motor vehicle and trailer manufacturing services." The Authority examined the explanatory notes to the Scheme of Classification of Services, which indicated that service code 998881 encompassed motor vehicle manufacturing services, trailers, semitrailer manufacturing services, and motor vehicle parts manufacturing services. Since the applicant was engaged in the manufacturing/fabrication of trailers, their services were deemed to fall under Service Code 998881, aligning with the classification provided in the explanatory notes.

Issue 3: Appropriate GST rate post-amendment for the applicant's services

Lastly, the applicant inquired about the correct GST rate post-amendment for their services. The Authority clarified that the applicant's services were initially covered under SI.No.26(ii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and subsequently under SI.No.26(iii)/(iv) after an amendment. The services were taxed at 9% CGST and 9% SGST from 01.07.2017. However, due to an inadvertent error in claiming the applicable entry under the notification, the applicant mistakenly believed their services were taxed at 12% GST. The Authority confirmed that the correct GST rate for the applicant's services was 18% (9% CGST & 9% SGST) as per the amended notification.

In conclusion, the Authority ruled that the applicant should charge GST at 28% for their services, classify their services under SAC 998881, and apply an 18% GST rate post-amendment.

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