2023 (11) TMI 871 - AAR - GST

Classification of service - job work of converting raw material into Antraquinone derivatives - Whether the service in question falls within the entry Sr. No. 26 of notification No. 11/2017-CT (Rate) dated 28.6.2017, as amended vide notification No. 20/2017-CT (Rate) dated 30.9.2019 SAC 9988 (id) attract GST @ 12% or otherwise? - HELD THAT - The description of the heading 9988 is manufacturing services on physical inputs (goods) owned by others. Job work as defined under section 2(68) of the CGST Act, 2017, 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 has stated that they are engaged in converting the inputs Nitroantraquinone (HSN 2909); (ii) Monon methyl Amine (HSN 2921) (iii) Bromine (HSN 2801) supplied by the principal into Antraquinone derivatives (HSN 2914). A conjoint reading of notification No. 11/2017-CT (Rate) dated 28.6.2017, as amended, together with circular No. 126/45/2019-GST dated 22.1 1.2019, clearly depicts that there is a clear demarcation between scope of the entries at item (id) and item (iv) in so far as heading 9988 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 is concerned. While entry (id), ibid covers job work services as defined in section 2(68) of CGST Act, 2017, in respect of treatment or processing undertaken by a person on goods belonging to another registered person, the entry (iv) on the other hand while excluding the services covered by entry (id), covers only such services which are carried out on physical inputs/goods which are owned by persons other than those registered under the CGST Act. To summarize, therefore, Sr. No. 26(id) (residual entry covers job work where inputs are sent by registered person, while Sr. No. 26(iv) covers manufacturing services (processing) wherein inputs (goods) are sent by an unregistered person. The service in question falls within the ambit of entry Sr. No. 26(id) of notification No. 11/2017-CT (Rate) dated 28.6.2017, as amended vide notification No. 20/2017-CT (Rale) dated 30.9.2019 and is classifiable under SAC 9988 and will attract GST @ 12%.

Summary

Issues: Determination of whether the service provided by the applicant falls within the purview of entry Sr. No. 26(id) of notification No. 11/2017-CT (Rate) dated 28.6.2017, as amended by notification No. 20/2017-CT (Rate) dated 30.9.2019; classification under SAC 9988; and applicability of GST at 12% [CGST 6% + SGST 6%].

Brief Facts:
The applicant, a partnership firm, is engaged in job work converting raw materials owned by others into Antraquinone derivatives for a registered client. The process involves various steps such as mixing, heating, centrifugation, distillation, filtration, and chilling, with ownership of goods retained by the client throughout.

Discussion and Findings:
The key consideration is whether the job work service provided by the applicant aligns with the definition of job work under the CGST Act, 2017, and falls under entry Sr. No. 26(id) of the notification. The circular clarifies the distinction between job work services and manufacturing services on physical inputs owned by others.

Analysis:
The description of heading 9988 pertains to manufacturing services on physical inputs owned by others, with job work defined as treatment or processing on goods belonging to another registered person. The applicant's process of converting specific raw materials for their registered client fits within the ambit of entry Sr. No. 26(id) of the notification.

Conclusion:
After careful consideration, it is ruled that the service provided by the applicant falls within entry Sr. No. 26(id) of notification No. 11/2017-CT (Rate), classified under SAC 9988, and attracts GST at 12% [CGST 6% + SGST 6%]. The ownership structure and nature of the job work align with the criteria outlined in the relevant provisions.

Ruling:
The service in question is deemed to fall within entry Sr. No. 26(id) of notification No. 11/2017-CT (Rate), classified under SAC 9988, and subject to GST at 12% [CGST 6% + SGST 6%].