GST Rate for Job Work, Goods and Services Tax - GST

[Kaustubh Karandikar]

XYZ doing the PCB Assembly job work where the PQR is sending XYZ the raw material (Electronic components, bare PCB and all) in kit format. XYZ are doing assembly and soldering and sending it back to PQR. Both XYZ and PQR are registered with GST. What is the GST Rate that XYZ should charge to PQR for this job work?

Posts / Replies

[Amit Agrawal]

In AAR ruling in RE: M/S. S.B. RESHELLERS PVT. LTD. (2021 (10) TMI 1160), following Para is worth noting:

"5.11.6 In view of the above discussions, we hold that the subject activity of re shelling old and worn out and unusable sugar mill rollers is an activity of repair and squarely falls under SAC 9987. Since the said activity of reshelling of old sugar mill rollers is neither manufacturing nor job work, it will continue to attract 18% GST and not 12% GST in terms of clause (id) of Sr. No.26 of Notification No.11/2017-CT(R), dt.28.06.2017."

[KASTURI SETHI]

Yes, Sir. Both aspects (non-manufacturing service and non-job-work) are covered in this decision of AAR.

[Amit Agrawal]

In AAR ruling in IN RE: M/S. IONBOND COATINGS PVT. LTD. 2022 (3) TMI 540 which specifically refers to 'Explanatory Note/s', following Para/s are worth noting:

"2.9 Section note to SAC 9988 Manufacturing services on physical inputs owned by others: The services included under Heading 9988 are 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. Since this Heading covers manufacturing services, the output is not owned by the unit providing this service. Therefore the value of the services in this Heading is based on the service fee paid, not the value of the goods manufactured.

2.10 Hence, SAC Code 9988 also includes part of the process from entire manufacturing process. It is not relevant whether the job worker process amounts to manufacturer or not.

.............

2.13 In view of the above, it may be seen that there is a clear demarcation between scope of the entries at item (id) and item (iv) under heading 9988 of Notification No. 11/2017- Central Tax (Rate) dated 28-06-2017. Entry at item (id) covers only job work services as defined in section 2 (68) of CGST Act, 2017, that is, services by way of treatment or processing undertaken by a person on goods belonging to another registered person. On the other hand, the entry at item (iv) specifically excludes the services covered by entry at item (id), and therefore, 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."

[Amit Agrawal]

Above are submissions made by the applicant. Followings are some important findings given by AAR in said ruling, which are worth noting:

"5.6 According to the applicant's submissions no new products emerge after the subject process been carried out by the applicant. The basic characteristics of the product have not been lost. Thus, in view of the contention of the applicant that they are a jobworker, we now discuss the specific issue hereon.

5.7 Job work is just a process undertaken by a job worker on goods belonging to a principal. Job work may or may not amount to manufacture. Further, a job worker may or may not use some portion of his material. Job work has been defined under section 2(68) of the CGST Act, 2017 to mean 'any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly'.

5.8 Whereas the term 'manufacture' has been defined under section 2(72) of the GST Act, 2017 to mean “processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term “manufacturer” shall be construed accordingly”

5.9 The product that comes into emergence after the coating process is not the different product but the process undertaken by them only enhances the performance of the said products. No new products emerge after the subject coating process has been carried out."