2018 (7) TMI 1422 - AAR - GST

Nature of supply - Classification - Business of fabrication & fitting out bus bodies on the chassis supplied by its customers - Job work or contract for sale of goods? - rate of tax. Whether the activity of fabrication & fitting and mounting of bus bodies on the chassis supplied by the other party is a job work (SAC 9988 or contract of sale of bus body HSN CODE 8707? - If it is held to be a job work, what rate of tax is required to be charged and paid? Held that - It is only the chassis which is supplied by the customers of the applicant and in fact no treatment or process is undertaken by the applicant on the chassis itself, except fitment/mounting of bus body on the same. At the same time, bus body building involves use of raw materials/inputs etc., for manufacture/fabrication of bus body and the cost of these inputs, etc., do form the part of value which is being charged by the applicant from its customers - It emerges that the customer is providing only chassis. All inputs/materials required for fabrication of bus body, has to be used by the applicant from its own account. Under such situation it is the bus-body which is being fabricated and also being mounted on the chassis provided by the customer. Therefore, it is not merely job-work. It is supply of bus body and an activity of fitting/mounting of bus body on chassis is an ancillary activity to the principal activity of supply of bus-body. Hence, in terms of the clarification issued by the CBEC vide circular No.34/8/2018-GST dt.03.03.2018, the impugned activity is a composite supply, with principal supply being supply of bus-body - As the activity has not been held as supply of service, the second rate of tax on supply of service is not required to be spelt out in this ruling. Ruling - The activity of fabrication and fitting and mounting of bus bodies on the chassis supplied by the other party is a composite supply with supply of goods, i.e., bus-bodies, being principal supply (HSN code 8707).

Summary

Issues involved:
1. Determination of whether the activity of fabricating, fitting, and mounting bus bodies on chassis supplied by another party constitutes job work or a contract of sale of bus bodies.
2. Clarification on the applicable tax rate if the activity is considered job work.

Analysis:

Issue 1:
The applicant argued that the activity should be considered job work based on the definition provided in Section 2(68) of the CGST Act 2017. They referenced judgments such as 'M/S Kailash Engineering Co. Vs. State of Gujarat' and a High Court ruling to support their stance. Additionally, a clarification from the Asst. Commissioner CGST Jaipur was presented, stating that the activity falls under the definition of job work and is subject to an 18% GST rate. The state government also clarified that the activity is a work contract, not a sale of bus bodies.

Issue 2:
The Deputy Excise and Taxation Commissioner Faridabad (West) opined that the applicant's business involves the supply of bus bodies along with fitting and fabrication services, with the supply of bus bodies being the major part of the process. During the personal hearing, the applicant reiterated their stance, and no new information was provided. The Authority considered the CBEC Circular No. 34/8/2018-GST, which clarified that bus body building involves a supply of goods and services, and the classification depends on the principal supply in each case.

Discussion and Findings:
The Authority determined that the activity of fabricating, fitting, and mounting bus bodies on supplied chassis constitutes a composite supply, with the principal supply being the bus bodies. The chassis is provided by the customer, and the applicant uses their own materials for fabrication, indicating a supply of bus bodies rather than mere job work. The agreement with Uttarakhand Transportation Corporation further supported this conclusion. Therefore, the activity was deemed a composite supply with the principal supply being the supply of bus bodies.

Conclusion:
The Authority ruled that the activity of fabricating and fitting bus bodies on supplied chassis is a composite supply with the principal supply being bus bodies. As the activity was not classified as a supply of service, the specific tax rate for service supply was not addressed in the ruling.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by the applicant, the relevant legal interpretations, and the final ruling by the Authority for Advance Rulings Haryana.