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TMI Blog2023 (2) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of quantum/percentage of wastage allowed in manufacturing of gold ornaments - the percentage of wastage that may be allowed for gold ornament manufacturing process has been specified by Government of India, Ministry of Commerce and Industry. The wastage norms, though meant for items of export, may also be accepted as a general guideline for domestic market. In the instant case, the applicant submits that the principal allows him a wastage of 4% (40 gm wastage is agreed to be allowed against 1000 gm of pure gold) and the applicant, out of such wastage allowed to the extent of 4%, retains 1% of pure gold i.e., 10 gm of pure gold. In other words, the applicant delivers to his job worker 990 gm of pure gold thereby allowing 3% of wastage to his job worker. Whether any wastage claimed which is in excess of the specified limit can be treated as consideration for the purpose of value of taxable supply under sub-section (1) of section 15 of the GST Act? - HELD THAT:- Sub-section (1) of section 15 of the GST Act speaks that the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 (3) of the GST Act and the Rules prescribed thereunder, and the Regulations prescribed by the West Bengal Authority for Advance Ruling Regulations, 2018. 1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression GST Act would mean the CGST Act and the WBGST Act both. 1.2 The applicant submits that as a job worker he expects to receive an order for manufacture of gold ornaments from a registered person in the state of West Bengal (the principal). The business model, as ilustrated by the applicant, is as follows: (i) The applicant will be provided 1000 grams of pure gold by the principal for manufacturing of gold ornament; (ii) The applicant will be allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned to the principal thus comes at 960 grams. The consideration for providing this manufacturing service would be Rs.50,000/ - on which GST would be levied @ 5%. 2.2 The applicant submits that the provision for allowing such wastage by the principal is in the nature of normal loss that occurs during the course of manufacturing and it is an industry-wide practice to allow such provision for wastage or normal loss. 2.3 According to the applicant, the consideration for providing the manufacturing services is the making charge of the gold ornaments, whereas the provision for wastage of 40 grams of pure gold is to meet the normal loss that would occur during the course of manufacture. Further, these terms of consideration and provision for wastage would be expressly accepted by the applicant and the principal in the work order. It is thus imperative to distinguish the provision for wastage from consideration for supply of services. 2.4 The applicant, upon receipt of the pure gold from his principal, sub-contracts this job to another job worker wherein on the basis of the applicant s experience, internal efficiency and bargaining power, the provision for wastage allowed to the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process undertaken by a person on goods belonging to another registered person and the expression job worker shall be construed accordingly. A job worker thus undertakes the work for any treatment or process on the goods belonging to another registered person. In the instant case, the applicant undertakes the work of manufacturing of gold ornaments on pure gold that belongs to another registered person. Hence, the activities being carried out by the applicant comes under the purview of job work as defined in the GST Act. 4.4 Now we take the issue of allowing of wastage to the applicant for the purpose of manufacturing of gold ornaments. The applicant contends that the provision for allowing such wastage is in the nature of normal loss and it is an industry-wide practice to allow such provision for wastage or normal loss. We find that Government of India, Ministry of Commerce and Industry, Department of Commerce, Director General of Foreign Trade, in the HANDBOOK OF PROCEDURES [1st April, 2015 31st March, 2020] has prescribed the Wastage Norms for the Gems and Jewellery Sector. It would be pertinent to mention that in course of personal hearing, the authorised representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 4% (40 gm wastage is agreed to be allowed against 1000 gm of pure gold) and the applicant, out of such wastage allowed to the extent of 4%, retains 1% of pure gold i.e., 10 gm of pure gold. In other words, the applicant delivers to his job worker 990 gm of pure gold thereby allowing 3% of wastage to his job worker. 4.6 Now the question arises whether any wastage claimed which is in excess of the specified limit can be treated as consideration for the purpose of value of taxable supply under sub-section (1) of section 15 of the GST Act. As per sub-clause (a) of clause 38 of section 2, consideration in relation to the supply of goods or services or both includes- (a) any payment made or to be made, whether in money or otherwise , in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; [emphasis supplied] 4.7 Further, sub-section (1) of section 15 of the GST Act speaks that the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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