2022 (10) TMI 866 - AAR - GST

Classification of supply - supply of goods or supply of services - activity of commercial vehicles body-building on a job-work basis, on the chassis supplied by the customer - applicable rate of GST - HELD THAT - The applicant is fabricating the body on the chassis belonging to the customer. The ownership of the chassis remains with the customer and at no stage of the process of fabrication of the body, the title in the chassis is transferred to the applicant. Therefore, the applicant is fabricating the body on the chassis belonging to another person and hence the activity is squarely covered under Para 3 of Schedule II of the CGST Act, 2017 as a treatment or process which is applied to another person's goods and accordingly is a supply of services. Classification of the activity and the rate of GST applicable - HELD THAT - As per the Scheme of Classification of Services notified as Annexure to Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 the Heading Service Accounting Code - 9988 pertains to manufacturing services on physical inputs (goods) owned by others. The Explanatory Notes to the Scheme of Classification of Services states that the services included in the Heading 9988 -Manufacturing services on physical inputs owned by others - are services performed on physical inputs owned by units other than the units providing the service. As such, they are characterized as outsourced portions of a manufacturing process or a complete outsourced manufacturing process - the value of the services in this Heading is based on the service fee paid, not the value of the goods manufactured. SAC - 99888 under Heading 9988 pertains to Transport equipment manufacturing services and Sub - Heading 998881 pertains to Motor vehicle and trailer manufacturing services. Therefore, the activity of the applicant is appropriately classifiable under Service Accounting Code 998881.

Summary

Issues Involved:
1. Determination of whether the activity of commercial vehicles body building on a job-work basis, on the chassis supplied by the customer, constitutes a supply of goods or a supply of services.
2. Identification of the applicable rate of GST if the activity is classified as a supply of goods.
3. Identification of the applicable rate of GST if the activity is classified as a supply of services.

Analysis:

Issue 1:
The applicant, engaged in body building of commercial vehicles, sought an advance ruling to determine if their activity on customer-supplied chassis is a supply of goods or services. The applicant contended that their activity falls under job work as defined in the CGST/SGST Acts and is akin to a service under Schedule II, Paragraph 3. The jurisdictional officer confirmed no prior decisions on the matter. After examination, it was established that the activity of fabricating bodies on customer-owned chassis qualifies as a supply of services under Para 3 of Schedule II, as it involves treating or processing another person's goods.

Issue 2:
Since the activity was classified as a supply of services, the next step was to ascertain the applicable rate of GST. The classification of the service was determined under SAC 998881, falling under manufacturing services on physical inputs owned by others. The activity was found liable for GST at 18% (9% CGST + 9% SGST) as per the relevant entry in Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.

Issue 3:
Given the classification of the activity as a supply of services and the determination of the applicable GST rate, the ruling was issued stating that the commercial vehicle body building activity on customer-supplied chassis is indeed a supply of service. The applicable GST rate for this service was confirmed to be 18% (9% CGST + 9% SGST) under the specific entry in the notification mentioned above.

This detailed analysis of the judgment outlines the applicant's contentions, the jurisdictional officer's remarks, the discussion, findings, and the final ruling provided by the Authority for Advance Ruling in Kerala.