2020 (7) TMI 480 - AAR - GST

Classification of supply - mounting of Bus/ Truck Body by the job worker on the chassis supplied by the principle for which the applicant charged fabrication charges including cost of certain material that was consumed during the process of job work - whether classified as supply of service under HSN 9988? - Circular no. 52/26/2018-GST issued by Government of India, Ministry of Finance, Department of Revenue dated 9th August, 2018. HELD THAT - The supply towards provision of services in respect of activity of mounting/ fabrication of bodies on chassis provided by Customer should be treated as supply of bus or provision of services in respect of activity of mounting/fabrication of bus body on the chassis wherein the said activity of mounting/fabrication is outsourced to the Applicant by owner/provider of chassis, in no case the ownership of the chassis belongs to the applicant, hence in both the scenarios mentioned in the question 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%.

Summary

Issues Involved:
1. Determination of GST rate applicable for the activity of mounting/fabrication of bus bodies on chassis provided by customers.
2. Classification of the supply as either a supply of goods or a supply of services.
3. Impact of ownership of chassis on the taxability of the fabrication activity.

Detailed Analysis:

1. Determination of GST Rate Applicable for Mounting/Fabrication of Bus Bodies on Chassis Provided by Customers:
The applicant, engaged in manufacturing chassis and fabricating bus bodies, sought clarity on the GST rate applicable when customers provide the chassis for body fabrication. The applicant argued that the activity should be classified as a service, attracting 18% GST as per Circular No. 52/26/2018-GST dated 9th August 2018, which distinguishes between complete vehicle supply (28% GST) and job work services (18% GST).

2. Classification of the Supply as Either a Supply of Goods or a Supply of Services:
The judgment clarified that the activity of fabricating bus bodies on customer-supplied chassis constitutes a supply of services. The relevant legal provisions cited include Section 2(68) of the CGST Act, defining job work, and Schedule II, para 3 of the CGST Act, which states that any treatment or process applied to another person’s goods is a supply of services. The fabrication work on the chassis is thus classified under HSN 9988, attracting 18% GST.

3. Impact of Ownership of Chassis on the Taxability of the Fabrication Activity:
The ruling emphasized that the ownership of the chassis remains with the customer throughout the fabrication process. This ownership factor is crucial in determining the nature of the supply. Since the chassis is owned by the customer, the fabrication activity performed by the applicant is considered job work, a service, rather than a supply of goods. The ruling referenced Circular No. 52/26/2018-GST, which supports this interpretation, stating that fabrication on a customer-owned chassis is a service taxed at 18%.

Conclusion:
The Authority for Advance Ruling concluded that the activity of mounting/fabricating bus bodies on customer-supplied chassis should be treated as a supply of services under SAC 998881 - "Motor vehicle and trailer manufacturing services," taxable at 18% GST (9% CGST and 9% SGST). This classification applies regardless of whether the chassis is originally manufactured by one of the applicant's units or by another OEM. The ruling is valid under Section 103(2) of the GST Act until declared void under Section 104(1).