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TMI Blog2021 (1) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... silver from gold. The remaining pure gold is weighted to determine the percentage of purity. Upon completion of process and analysis, the applicant issues the certificate of purity of gold. After that, a certificate of purity with pure gold has been given to the recipient of service/customer. This pure gold is used by service recipient/customer in the further process of making new jewellery or coins/biscuits. Whether the activity Refining of gold from old jewellery and coins/biscuits and Conversion of old gold jewellery into coins/biscuits as per specification given by service recipient provided to registered person will be covered under the definition of job work under section 2 (68) of CGST Act, 2017 and also what is the classification of Service and rate for the service provided to registered and unregistered person? - HELD THAT:- It is clear from definition of Job-work that job work involves (i) two persons, (ii) goods and (iii) process/treatment on the goods. Also, the procedure for job work is prescribed under Section 143 of CGST Act and Rule 45 of the CGST Rules - In the instant case, the applicant is a person, who is carrying out the process of refining the pure gold f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accounting Code (SAC) 9983 - In view of the entry No 21 of Notification No. 11/2017-CT (Rate) dated 28.06.2017, the rate of GST for the service of testing of purity of gold would be 18 % Whether the service of refining of old gold jewellery or coins/ biscuit as well as testing of purity of gold, will be considered as composite supply? If yes, what is the rate of tax applicable on it? - HELD THAT:- Under the GST Act, a composite supply would mean a supply consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. We find that applicant proposes to provide more than two taxable supplies to the recipient. In respect of supply, which consists of more than two taxable supplies and to fall within the ambit of composite supply, it will be necessary for us to determine whether a particular supply is naturally bundled in the ordinary course of business or otherwise. As per the definition of Principal supply, one of the supply of goods or service should have predominant element and other supply of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the members of the authority restrict ourselves to give any ruling on the said question. - ADVANCE RULING NO. GUJ/GAAR/R/104/2020 - - - Dated:- 14-10-2020 - SANJAY SAXENA AND MOHIT AGRAWAL, MEMBER Present for the applicant : Shri Kamal J Parekh M/s. Uday Laxman Jadhav (Legal name), Shree Ashapuri Touch Refinery (Trade Name), Shop No. 3, Panchtirth Apartment, Nani Mehtwad, Valsad-396001 having a GSTIN : 24AHIPJ0290Q1Z1, has filed an application for Advance Ruling under Section 97 of CGST Act, 2017 and Section 97 of the GGST Act, 2017 in FORM GST ARA-01 discharging the fee of ₹ 5,000/- each under the CGST Act and the GGST Act. 2. M/s. Uday Laxman Jadhav (Legal name), Shree Ashapuri Touch Refinery (Trade Name) is a registered under GST law. The applicant submitted that they are engaged in the providing services of Testing and Refinery of gold. 2.1 Purpose of refine gold:- Gold jewellery is not always all pure gold. The reason is that gold of jewellery is soft. For this reason, refiner must evaluate material to calculate what percentage of pure gold it is. Karat a unit of measurement used to know the how much gold is in an alloy. A karat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Old gold (22K gold) jewellery or coins/biscuits converted into pure gold (24K gold) and testing of purity of gold. Refining and testing of gold (Job Work and Testing) To find pure gold and to know the purity of gold. 5. Accordingly, the applicant sought the Advance Ruling on the following questions : 1. Whether services of ; (i) Refining of gold from old jewellery and coins/biscuits, and (ii) Conversion of old gold jewellery into coins/biscuits as per specification given by service recipient; Provided to registered person will be covered under the definition of job work under section 2 (68) of CGST Act, 2017? What is the classification and rate of tax for these services provided to registered person and unregistered person? 2. What is the classification and rate of tax for services of testing of purity of gold? 3. If the applicant rendered the service of refine of old gold jewellery or coins/ biscuit as well as testing of purity of gold, then it will be considered as composite supply? If yes, what is the rate of tax applicable on it? 4. What are the consequence if, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 28.06.2017 and read with Not. No. 11/2017ST (Rate) dated 30.06.2017. Sl.No. Chapter Description of Service Rate (CGST+SGST) % Condition 26 Heading 9988 Manufacturing services on physical inputs (goods) owned by others (iv) Manufacturing services on physical inputs (goods) owned by others, other than (i),(ia), (ii), (iia) and (iii) above 18 7. The relevant provisions of GST law for service of testing of purity of gold :- 7.1 Section 65(106) of Finance Act, 1994 as amended: (106) technical testing and analysis means any service in relation to physical, chemical, biological or any other scientific testing or analysis of information technology software or any immovable property, but does not include any testing or analysis service provided in relation to human beings or animals; Explanation For the removal of doubts, it is hereby declared that f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply and supply of goods is a principal supply. 8.3 Section 2(90) of CGST Act, 2017 (90) Principal supply means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary; 8.4 Classification and rate of tax The applicant further submitted that in view of the above, if the applicant provide service of refine gold as well as testing of purity of gold, then rate for the services provided is given below (Notification No. 11/2017-CT (Rate) dated 28.06.2017 and read with Not. No. 11/2017-ST (Rate) dated 30.06.2017). Sl.No. Chapter Description of Service Rate (CGST+SGST) % Condition Applicable rate (CGST+SGST)( percent) for composite supply 21 Heading 9983 Other professional, technical and business services 18 (iv) Other professional, technical and business services other than (i) and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to convert the old jewelley (22k) gold /coins/biscuits into pure gold of 24K. Purpose of refine gold:- Gold jewellery is not always all pure gold. The reason is that gold of jewellery is soft. For this reason, refiner must evaluate material to calculate what percentage of pure gold it is. Karat a unit of measurement used to know the how much gold is in an alloy. A karat is one part out of 24. Pure gold is converted into 22K gold for manufacturing of gold jewellery or coins/ biscuits. To make it harder, manufacturers use other metals like platinum, silver or copper and this gold alloy can be used to make jewellery as well as coins/biscuits. 2.2 Process of refine gold:- The most accurate methods of refining gold is the fire assay method. This method is one of the industry standard processes for refining the gold. This process required highly skilled workers to carry out meticulously. 14. We observe that the applicant received gold jewellery or coins/ biscuits (after melting old jewellery) from service recipient/customer to refine pure gold and testing of purity of gold. All old gold jewellery or coins/biscuits collected by applicant are placed in vess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove definition, it is clear that job work involves (i) two persons, (ii) goods and (iii) process/treatment on the goods. Also, the procedure for job work is prescribed under Section 143 of CGST Act and Rule 45 of the CGST Rules, in terms of Section 143(1)(a) : (1) A registered person (hereafter in this section referred to as the principal ) may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall, - (a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out, to any of his place of business, without payment of tax. On a harmonious reading of the definition of Job Work and the procedure for the same, it is construed that the principal will send the inputs to the job worker for conducting any treatment/process (which may or may not amount to manufacture) and shall bring back the same after completion of job work or otherwise. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old gold jewellery into coins/biscuits, as per the specification of the recipient, who is a registered person, gets covered under the definition of Job work . 19. The applicant also carries out the said process of refining the pure gold from old jewellery and coins/biscuits and converting the old gold jewellery into coins/biscuits as per the specification of the customer belonging to unregistered person. The said activity of refining of pure gold from old jewellery and coins/biscuits and converting the old gold jewellery into coins/biscuits as per the specification of the recipient, who is a un-registered person does not get covered under the definition of Job-work as defined under Section 2(68) and Section 143 of CGST Act, 2017. It is on account of the fact that in order to qualify any process/ treatment under the category of Job-work , the principal i.e. owner of the goods should be registered person. Accordingly, the said service provided to un-registered person is treated as services on physical input (goods), which are owned by persons other than those registered under the CGST Act, 2017. 20. To decide the Classification of the aforesaid services, we refer to the expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, merits classification under Service Accounting Code (SAC) 9988. 21. To determine GST rate of service classifiable under SAC 9988, we refer the Notification No. 11/2017-CT (Rate) dated 28.06.2017, as amended. The relevant entry No. 26 of Notification No. 11/2017-CT(Rate), as amended vide various Notifications, is as under : 26 Heading 9988 (Manufacturing services on physical inputs (goods) owned by others) (i) Services by way of job work in relation to- (a) Printing of newspapers; (b) Textiles and textile products falling under Chapter 50 to 63 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975); ; (c) all products other than Diamonds falling under Chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975); ; 2.5 - (d) Printing of books (including Braille books), journals and periodicals; (da) printing of all goods falling under Chapter 48 or 49, which attract CGST @ 2.5 per cent. or Nil; (e) Processing of hides, skins and leather falling under Chapter 41 in the First Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 28.06.2017, the rate of GST for the service of refining pure gold from old jewellery and coins/biscuits and conversion of gold jewellery into coins/biscuits, as per the specification belonging to the registered person, covered under Job-work would be leviable to GST @ 5 % i.e. {CGST 2.5% +SGST 2.5%}. Further, GST rate for the aforesaid services provided on physical input (goods) owned by un-registered person would be leviable GST @ 18% i.e. {9% CGST + 9% SGST} in terms of entry No. (iv) of Notification No. 11/2017-CGST (Rate) dated 28.06.2017. In this regard, CBIC vide Circular No. 126/45/2019GST dated 22.11.2019 has clarified the following: I am directed to say that doubts have been raised with regard to scope of the notification entry at item (id) under heading 9988 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 inserted with effect from 1-10-2019 to implement the recommendation of the GST Council to reduce rate of GST on all job work services, which earlier attracted 18% rate, to 12%. It has been stated that the entry at item (id) under heading 9988 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 inserted with effect from 1-10-2019, pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. We observe that the applicant receive gold jewellery or coins/ biscuits (after melting old jewellery) from service recipient/customer for testing of purity of gold. All old gold jewellery or coins/biscuits collected by applicant are placed in vessel made up of magnesium and heated and melted at a temperature between roughly 1000 and 12000 degree Celsius in furnace. In this process, all metals absorbs in the alloy and left only gold and silver. The available gold and silver is heated in Nitric acid to separate the silver from gold. The remaining pure gold is weighted to determine the percentage of purity. Upon completion of process and analysis, the applicant issues the certificate of purity of gold. After that, a certificate of purity with pure gold has been given to the recipient of service/customer. 24. To determine the classification of service of testing of purity of gold, we refer Annexure to the Notification No. 11/2017-CT (rate) dated 28.06.2017 for the classification of the said service. The relevant entry No. 296 of the said Annexure is read, as under: 296 Heading 9983 Other professional, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, we take up the third question whether the service of refining of old gold jewellery or coins/ biscuit as well as testing of purity of gold, will be considered as composite supply? If yes, what is the rate of tax applicable on it? 27. To determine whether the service of refining of old gold jewellery or coins/ biscuit as well as testing of purity of gold is a composite supply or otherwise. First, we decide whether the supplies are naturally bundled in conjunction with each other as required by the definition of composite supply . Hence, we refer to the definition of `Composite Supply as mentioned in sub-section (30) of Section 2 of CGST Act, 2017, which is as under: ` Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply . Under the GST Act, a composite supply would mean a supply consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are naturally bundle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er pays the same amount, no matter how much of the package they actually receive or use. The elements are normally advertised as a package. The different elements are not available separately. The different elements are integral to one overall supply - if one or more is removed, the nature of the supply would be affected. No straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business. Each case has to be individually examined in the backdrop of several factors some of which are outlined above. 28. Thus, for a supply to qualify as a composite supply , the following needs to be satisfied: (i) There should be more than two supplies of goods or services or both; (ii) They should be naturally bundled and supplied in conjunction with each other in the ordinary course of business; and (iii) There should be one principal supply. 29. The above conditions have been examined in the present case, as under: 29.1 There should be more than two supplies of goods or services or both: The applicant is providing services of (i) refining of pure gold from old jewellery and coi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces is covered under Mixed supply or otherwise. Mixed supply is defined under Section 2(74) of the CGST Act. Section 2(74) is being reproduced here in under: (74) Mixed Supply means two or more individual supplies of goods or services or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Illustration : A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately; 30.1 The Flyers issued by the Central Board of Excise and Customs ( CBEC ) for mixed supply have provided guidance on how to determine whether supplies are mixed supply: In order to identify if the particular supply is a Mixed Supply, the first requisite is to rule out that the supply is a composite supply. A supply can be a mixed supply only if it is not a composite supply. As a corollary it can be said that if the transaction consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26 Heading 9988 (Manufacturing services on physical inputs (goods) owned by others) (i) Services by way of job work in relation to- (a) Printing of newspapers; (b) Textiles and textile products falling under Chapter 50 to 63 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975); ; (c) all products other than Diamonds falling under Chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975); ; 2.5 - (ii) Entry No. (iv) of Notification No. 11/2017-CT (Rate) dated 28.06.2017, as amended, is applicable in case of supply of service of refining of pure gold to un- registered customer/ recipient and same is reproduced, as under: (iv) Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ib), (ic), (id), (ii), (iia) and (iii) above. 9 - (iv) The relevant entry No. 21 of Notification No. 11/2017-CT(Rate), as amended, vide various Notifications, is applicable for the supply of testing of purity of gold service and same is re-produced, as und ..... 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