2021 (12) TMI 162 - AAR - GST

Classification of services - rate of GST - body building activity on the chasis provided by the principal - Taxable @ 18% of GST or not - applicability of clarification of CBIC vide para no. 12.3 of Circular No. 52/26/2018-GST dated 09.08.2018 clarifying 18% rate of GST in respect of building of body of buses - HELD THAT - The said circular clarify that GST applicable on the activity of bus body building on job work basis is 18%. As such, the body building on job work basis is pre-requisite for applicability of GST rate of 18%. As per Section 2 (68) of the CGST Act, 2017, Job work means any treatment or process undertaken by a person on goods belonging to another registered person and the expression job worker shall be construed accordingly . The applicant builds the body on chassis by purchasing all materials required for body building of the vehicle. The applicant is receiving only chassis and all inputs/materials required for fabrication of the body has to be used by the applicant from its own account. It is observed from the sample tax invoice of the principal issued to the applicant that there is mention of value of chassis, GST amount and total amount. It indicates that the ownership of chassis has been transferred to the applicant by the principal. Moreover, Tax Invoice issued by the applicant to the principal has mention of description of goods along with Body Serial No. as well as charging GST Rate of 28%. As such, it is clear that there is supply of the body of the vehicle in the said transaction. The fact gets pretty clear when circular in situation 12,2(b) refers that body builder recover fabrication charges including certain material that was consumed during the process of job work. However, in the instant case, the dominant character of work relates to supply of goods rather than supply of service. As such, this case is not covered under circular No. 52/26/2018-GST dated 09-08-2018. All inputs required for fabrication of vehicle-body (Tippers, Trailers, Truck, Tankers) on chassis are procured by the applicant and fabricated vehicle-body mounted on the chassis is supplied by the applicant - Therefore, in the instant case, it is a supply of body of the vehicle and the activity of fitting/mounting of vehicle-body on chassis is an ancillary activity to the principal activity of supply of vehicle-body. Hence, in terms of the clarification issued by the CBEC vide circular No. 34/8/2018-GST, dated 1-3-2018, the impugned activity is a composite supply, with principal supply being supply of body of the vehicle.

Summary

Issues Involved:
1. Classification of the body building activity on the chassis provided by the principal.
2. Applicability of CBIC Circular No. 52/26/2018-GST dated 09.08.2018 to the applicant's case.

Detailed Analysis:

Issue 1: Classification of the Body Building Activity on the Chassis Provided by the Principal

The applicant, engaged in the body building and mounting of bodies on chassis of Tippers, Tankers, Trucks, and Trailers, sought clarification on whether such activity would amount to manufacturing services attracting 18% GST. The applicant argued that their activity involves significant fabrication and assembly processes, and referenced CBIC Circular No. 52/26/2018-GST, which clarifies that bus body building on a chassis provided by the principal is classified as a service attracting 18% GST.

The Authority examined the nature of the applicant’s activities, noting that the applicant procures all materials required for the body building from its own account, and only the chassis is provided by the principal. The Authority referenced Section 2(68) of the CGST Act, 2017, which defines "job work" as any treatment or process undertaken by a person on goods belonging to another registered person. Given that the applicant purchases all materials and only receives the chassis, the activity does not qualify as job work.

Furthermore, the Authority referred to Section 2(72) of the CGST Act, 2017, which defines "manufacture" as processing raw materials or inputs resulting in a new product with a distinct name, character, and use. The body building activity on the chassis amounts to the manufacture of a motor vehicle, as per Chapter note 6 of Chapter 87 of the Central Excise Tariff Act, 1985.

Thus, the Authority concluded that the applicant’s activity is not classified as manufacturing services but as a supply of goods, attracting 28% GST.

Ruling on Issue 1: The body building activity on the chassis provided by the principal does not amount to manufacturing services attracting 18% GST.

Issue 2: Applicability of CBIC Circular No. 52/26/2018-GST Dated 09.08.2018

The applicant also sought clarification on whether the CBIC Circular No. 52/26/2018-GST, which specifies an 18% GST rate for bus body building on a chassis provided by the principal, applies to their case. The Circular differentiates between two scenarios: (a) where the bus body builder supplies the built-up bus to the customer, attracting 28% GST, and (b) where the body is built on a chassis provided by the principal, attracting 18% GST as a service.

The Authority noted that the Circular’s clarification applies to cases where the body builder only charges for fabrication, including certain materials consumed during the process. In the applicant’s case, the dominant character of the work is the supply of goods rather than services, as the applicant procures all materials required for the body building. The transaction involves the supply of the vehicle body, not merely a service.

Additionally, the Authority referenced CBIC Circular No. 34/8/2018-GST, which clarifies that the classification of bus body building as a supply of goods or services depends on the principal supply. In the applicant’s case, the principal supply is the body of the vehicle, making it a composite supply with the principal supply being the supply of goods.

Ruling on Issue 2: The CBIC Circular No. 52/26/2018-GST dated 09.08.2018 does not apply to the applicant’s case.

Conclusion:
The Authority for Advance Ruling concluded that the body building activity on the chassis provided by the principal does not amount to manufacturing services attracting 18% GST, and the clarification of CBIC Circular No. 52/26/2018-GST dated 09.08.2018 does not apply to the applicant’s case. The ruling is valid within the jurisdiction of the Authority for Advance Ruling Uttar Pradesh and subject to the provisions under Section 103(2) of the CGST Act, 2017 until declared void under Section 104(1) of the Act.