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2021 (1) TMI 374 - AAR - GSTJob Work or not - Classification of services - rate of tax - Refining of gold from old jewellery and coins/biscuits - Conversion of old gold jewellery into coins/biscuits as per specification given by service recipient - classification and rate of tax for services of testing of purity of gold - composite supply or not - What are the consequence if, the applicant charged more or less the rate of services of refining gold than the actual rate? HELD THAT - The applicant received gold jewellery or coins/ biscuits (after melting old jewellery) from service recipient/customer to refine pure gold and testing of purity of gold. All old gold jewellery or coins/biscuits collected by applicant are placed in vessel made up of magnesium and heated and melted at a temperature between roughly 1000 and 12000 degree Celsius in furnace. During the process, all metals absorb in the alloy leaving behind only gold and silver. The available gold and silver is heated in Nitric acid to separate the silver from gold. The remaining pure gold is weighted to determine the percentage of purity. Upon completion of process and analysis, the applicant issues the certificate of purity of gold. After that, a certificate of purity with pure gold has been given to the recipient of service/customer. This pure gold is used by service recipient/customer in the further process of making new jewellery or coins/biscuits. Whether the activity Refining of gold from old jewellery and coins/biscuits and Conversion of old gold jewellery into coins/biscuits as per specification given by service recipient provided to registered person will be covered under the definition of job work under section 2 (68) of CGST Act, 2017 and also what is the classification of Service and rate for the service provided to registered and unregistered person? - HELD THAT - It is clear from definition of Job-work that job work involves (i) two persons, (ii) goods and (iii) process/treatment on the goods. Also, the procedure for job work is prescribed under Section 143 of CGST Act and Rule 45 of the CGST Rules - In the instant case, the applicant is a person, who is carrying out the process of refining the pure gold from old gold jewellery and coins/biscuit and converting the old gold jewellery into coins/biscuits, as per the specification of the customer. Both the said processes are being done on old jewellery and/or coins/biscuits i.e. on the goods and the goods i.e. old jewellery and/or coins/biscuits belonging to another registered person. The applicant being a job worker satisfies all the necessary ingredients to carry out job work activity. Hence, we can conclude that the said process of refining of pure gold on old jewellery or coins/biscuits and converting the old gold jewellery into coins/biscuits, as per the specification of the recipient, who is a registered person, gets covered under the definition of Job work . The service of refining pure gold from old jewellery and coins/biscuits and converting the jewellery into coins/biscuits, as per the specification of the registered person and un-registered person, merits classification under Service Accounting Code (SAC) 9988 - Board Circular has clarified that the entry at item (iv) covers only such services, which are carried out on physical inputs (goods) owned by persons other than those registered under the CGST Act. Hence, service of refining of pure gold from old jewellery and coins/biscuits owned by unregistered person is covered under entry No. (iv) of aforesaid Notification No. 11/2017-CT (rate) dated 28.06.2017 and accordingly, GST rate would be 18 %. Classification and rate of tax for services of testing of purity of gold - HELD THAT - The applicant receive gold jewellery or coins/ biscuits (after melting old jewellery) from service recipient/customer for testing of purity of gold. All old gold jewellery or coins/biscuits collected by applicant are placed in vessel made up of magnesium and heated and melted at a temperature between roughly 1000 and 12000 degree Celsius in furnace. In this process, all metals absorbs in the alloy and left only gold and silver. The available gold and silver is heated in Nitric acid to separate the silver from gold. The remaining pure gold is weighted to determine the percentage of purity. Upon completion of process and analysis, the applicant issues the certificate of purity of gold. After that, a certificate of purity with pure gold has been given to the recipient of service/customer - Hence, service of testing of purity of Gold merits classification under Service Accounting Code (SAC) 9983 - In view of the entry No 21 of Notification No. 11/2017-CT (Rate) dated 28.06.2017, the rate of GST for the service of testing of purity of gold would be 18 % Whether the service of refining of old gold jewellery or coins/ biscuit as well as testing of purity of gold, will be considered as composite supply? If yes, what is the rate of tax applicable on it? - HELD THAT - Under the GST Act, a composite supply would mean a supply consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. We find that applicant proposes to provide more than two taxable supplies to the recipient. In respect of supply, which consists of more than two taxable supplies and to fall within the ambit of composite supply, it will be necessary for us to determine whether a particular supply is naturally bundled in the ordinary course of business or otherwise. As per the definition of Principal supply, one of the supply of goods or service should have predominant element and other supply of goods or service should be of ancillary of principal supply. In the instant case, both the supply of service refining of pure gold and testing of purity of gold are equivalent to principal supply. Therefore, in such a scenario, it is not possible to assume one of supply as principal supply and other one as to ancillary supply - it is concluded that the applicant s service of refining of pure gold from old jewellery and coins/biscuits and testing of purity of gold are not covered under the definition of Composite supply, as defined in Section 2(30) of CGST Act, 2017. Whether the aforesaid supply of services is covered under Mixed supply or otherwise? - HELD THAT - There is no dispute that applicant s supplies consist of two supplies. It is also not in dispute that the supplies are made in conjunction with each other if customer demands. We have already observed in aforesaid paras that each of the supplies can be supplied separately as they are not dependent on each other and one supply of goods does not occasion the supply of other goods. Further, in the foregoing paras, it has already been ruled out that both the supply of services do not get covered under the definition of Composite Supply as defined in Section 2(30) of CGST Act, 2017. As the transaction put before us satisfies all the ingredient of mixed supply , we conclude that the transaction would get covered under the definition of mixed supply as defined in Clause 74 of Section 2 of the GST Act. In view of the Section 8(b) of CGST Act, 2017, the rate of tax for a mixed supply would be the rate of a particular supply, which attracts higher rate of tax out of two supplies of service - tt is observed that the higher GST rate of tax of a particular supply of Service is 18 %. Hence, the supply of service of refining of pure gold and testing of purity of gold is a mixed supply and GST rate would be 18 %. What are the consequence if, the applicant charged more or less the rate of services of refining gold than the actual rate? - HELD THAT - The above question on which applicant sought advance ruling is very vague and hypothetical question because the applicant in his advance Ruling application has not submitted any facts with regard to the said question. Therefore, in absence of any facts in this regard, we members of authority are not in position to give any ruling in respect of this question. Therefore, the members of the authority restrict ourselves to give any ruling on the said question.
Issues Involved:
1. Whether the services of refining gold from old jewellery and coins/biscuits and conversion of old gold jewellery into coins/biscuits provided to registered persons will be covered under the definition of job work under Section 2(68) of CGST Act, 2017. 2. Classification and rate of tax for these services provided to registered and unregistered persons. 3. Classification and rate of tax for services of testing the purity of gold. 4. Whether the combined service of refining old gold jewellery or coins/biscuits and testing the purity of gold will be considered as a composite supply and the applicable rate of tax. 5. Consequences if the applicant charges more or less than the actual rate for the services of refining gold. Detailed Analysis: 1. Definition of Job Work: The services of refining gold from old jewellery and coins/biscuits and conversion of old gold jewellery into coins/biscuits provided to registered persons are covered under the definition of job work as per Section 2(68) of CGST Act, 2017. The applicant satisfies the necessary conditions of job work, which involves treatment or process on goods belonging to another registered person. 2. Classification and Rate of Tax: - For Registered Persons: The services provided to registered persons are classified under SAC 9988. The GST rate for these services is 5% (2.5% CGST + 2.5% SGST) as per Sr. No. 26(i)(c) of Notification No. 11/2017-CT (Rate) dated 28.06.2017. - For Unregistered Persons: The services provided to unregistered persons are also classified under SAC 9988. However, the GST rate for these services is 18% (9% CGST + 9% SGST) as per Sr. No. 26(iv) of Notification No. 11/2017-CT (Rate) dated 28.06.2017. 3. Testing of Purity of Gold: The classification for the service of testing the purity of gold is SAC 9983. The GST rate for this service is 18% (9% CGST + 9% SGST) as per Sr. No. 21 of Notification No. 11/2017-CT (Rate) dated 28.06.2017. 4. Composite Supply: The combined service of refining old gold jewellery or coins/biscuits and testing the purity of gold does not qualify as a composite supply under Section 2(30) of CGST Act, 2017. These services are not naturally bundled and can be provided independently. Instead, they are considered a mixed supply under Section 2(74) of CGST Act, 2017. The GST rate for this mixed supply is 18% (9% CGST + 9% SGST) as the highest rate among the individual services. 5. Charging Incorrect Rate: The question regarding the consequences of charging more or less than the actual rate for the services of refining gold is considered vague and hypothetical. As the applicant did not provide specific facts, no ruling is provided on this issue. Ruling: 1. Services of refining gold from old jewellery and coins/biscuits and conversion of old gold jewellery into coins/biscuits provided to registered persons are covered under the definition of job work under Section 2(68) of CGST Act, 2017. These services are classified under SAC 9988. The GST rate for registered persons is 5% (2.5% CGST + 2.5% SGST), and for unregistered persons, it is 18% (9% CGST + 9% SGST). 2. The classification for services of testing the purity of gold is SAC 9983, and the GST rate is 18% (9% CGST + 9% SGST). 3. The combined service of refining old gold jewellery or coins/biscuits and testing the purity of gold is considered a mixed supply with a GST rate of 18% (9% CGST + 9% SGST). 4. No ruling is provided for the consequences of charging more or less than the actual rate for the services of refining gold.
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