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TMI Blog2020 (3) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... plicants supplier - the supply of the applicant is that of Supply of Service . Classification of the service - HELD THAT:- SAC 9988 as per the Explanatory notes, covers those services characterized as outsourced portions of a manufacturing process - In the case at hand, the electroplating job done by the applicant is a portion of manufacturing process of the customer of the applicant and therefore, the activity of the applicant is covered under SAC 9988. Thus the activity of undertaking manufacturing services by a registered person on the physical inputs owned by another registered person is a job work . In the case at hand, the applicant is a registered person and when he undertakes electroplating activities on the goods belonging to another registered person, then the nature of work of the applicant is Job work . Rate of GST - HELD THAT:- The applicable rate of tax from 30.09.2019, is given vide entry 26(id) of Notification No. 11/2017-C.T.(Rate) as amended by Notification No. 20/2019-C.T.(Rate) dated 30.09.2019, which is @ 6% CGST in cases when the goods are owned by another Registered person as in such cases the applicant supply engineering services as job-work and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant was extended an opportunity to be heard in person and was heard on 06.11.2019. The partners of the applicant firm S/Shri B.Sundar and R. Ravichandran appeared for the hearing. They stated that they are doing job work of electroplating. They submitted a copy of manufacturing process and stated that goods are received by delivery challan and they raise invoice on the services rendered. They added that that they will submit input invoices, delivery challan (inward) e-way bill (inward), outward invoices, outward (e-way bill), detailed manufacturing process, specifications, order copy given by the principal. They stated that they are seeking clarification on the eligibility of Notification 20/2019 which availed SI. No. 26 of 11/2017. They undertook to submit all documents within one week and stated that another Personal Hearing is not required. 3.2 The applicant submitted the following documents on 09.11.2019: 1) Copies of the Invoices for purchase of raw materials ... 8 nos. 2) Delivery Challan and E way bill of the customers who send their goods for electroplating - 3 sets 3) Purchase order of the Customers- 3 sets. 4) Specifications of the customers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not. STEP 9: WATER RINSE - To ensure the removal of previous processes chemical traces. The more the water rinse, better will be the effectiveness STEP 10: NEUTRALISATION - This process helps in neutralizing the pH range in the surface of the parts from base pH range. STEP 11: D M WATER - To ensure the removal of previous processes chemical traces. The more the water rinse, better will be the effectiveness. STEP 12: TRIVALENT YELLOW PASSIVATION - To coat some extra protection over the plated parts, which prevents oxidation. STEP 13: D M WATER - To ensure the removal of previous processes chemical traces. The more the water rinse, better will be the effectiveness. STEP 14: DRYING - To remove the liquid traces and moisture from the surface of the parts. STEP 15: FINAL INSPECTION - To finally ensure whether all the process are done properly and also to produce an inspection report. STEP 16: PACKING - To make the parts safe during the transit 4. The applicant is under the administrative jurisdiction of Central Tax and it is reported by the Deputy Commissioner, Ambattur Division that there is no proceedings i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. From the above, it is clear that this heading covers those services characterized as outsourced portions of a manufacturing process. In the case at hand, the electroplating job done by the applicant is a portion of manufacturing process of the customer of the applicant and therefore, the activity of the applicant is covered under SAC 9988. 6.4 Job-work is defined under Section 2(68) as below: Section 2(68) of CGST Act defines 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. Thus the activity of undertaking manufacturing services by a registered person on the physical inputs owned by another registered person is a job work . In the case at hand, the applicant is a registered pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts falling under Chapter 50 to 63 in the First Schedule to the Customs Tariff Act. 1975 (51of 1975), ; (B) the Explanation shall be omitted, (b) for item (ii) in column (3) and the entries relating thereto in columns (3), (4) and (5). the following shall be substituted, namely: - (3) (4) (5) (ii) Services by way of any treatment or process on goods belonging to another person, in relation to- (a) printing of newspapers; (b) printing of books (including Braille books), journals and periodicals. 2.5 - (iii) Manufacturing services on physical inputs (goods) owned by others, other than (i) and (ii) above. 9 - ; 7.3 Notification No. 31/2017-C.T.(Rate) dated 13.10.2017 amended entry at SI.No. 26 of Notification No.11/2017-C.T.(Rate) as under: (h) against serial number 26.in column (3), - (i) in item (i), for sub-item (c), the following sub-item shall be substituted, namely: - (c) all products falling under Chapter 71 in the First Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serted, namely: - (ea) manufacture of leather goods or footwear falling under Chapter 42 or 64 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) respectively; ; (B) for item (iii) and the entries relating thereto in columns (3), (4) and (5), the following shall be substituted, namely: - (3) (4) (5) (iii) Tailoring services. 2.5 - (iv) Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ii), (iia) and (iii) above. 9 - ; 7.5 Notification No. 20/2019 -C.T.(Rate) dated 30.09.2019 amended the said entry further as under: (m) against serial number 26, in column (3), in item (i), in clause (c), alter the words products , the figures and words other than diamonds, shall be inserted; (n) against serial number 26, in column (3), after item (ia) and the entries relating thereto in columns (3), (4) and (5), the following shall be inserted, namely: - (3) (4) (5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal tax payable on job work services 71% was paid through ITC Reducing the rate on job work services in this sector from 18% to 5% will result in inversion at the level of job worker. Placing the job work services under RCM will also result in blocking of ITC of the job worker and increasing of the costs of the job worker and the principal The rate reduction to 5% would lead to demand of refund at the hand of job-worker. Therefore instead of reducing the rate on job work services in the engineering and automobile sector from 18% to 5%, the same may be reduced to 12% The rate of GST on all job work services, which are not currently eligible for the 5% rate may be reduced to 12%. However the rate of GST applicable on Bus Body Building shall remain @18% as inputs used for bus body building are at higher rate of 28% or 18% Revenue implication of the proposal is ₹ 1100 Crores approximately. Thus amount shall shift as liability from job-worker to the principal and is therefore not a loss of revenue Thus, the applicable rate of tax from 30.09.2019, is given vide entry 26(id) of Notification No. 11/2017-C.T.(Rate) as amended by Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The activity of electroplating undertaken by the applicant is Supply of service and is classifiable under Heading 9988- Manufacturing services on Physical Inputs owned by others . 2. The applicable rate of tax is 9% CGST vide SI. No. 26 of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended and 9% SGST vide entry SI.No. 26 of Notification No. II(2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended for the period upto 30.09.2019 irrespective of whether the goods are owned by Registered or Unregistered persons as given in the Table above. 3. For the period from 01.10.2019, in case a. The goods are belonging to another Registered person, the applicable rate of tax, is 6% CGST vide entry SI.No. 26(id) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended and 6% SGST vide SI.No. 26(id) of Notification No. II(2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended. b. The goods are owned by unregistered persons, the applicable rate of tax is 9% CGST vide SI.No. 26(iv) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended and 9% SGST vide SI.No. 26(iv) of Notification No. II(2)/CTR/532(d-14)/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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