Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

Home Case Index All Cases GST GST + AAR GST - 2023 (2) TMI AAR This

  • Login
  • Summary

Forgot password       New User/ Regiser

⇒ Register to get Live Demo



 

2023 (2) TMI 873 - AAR - GST


Issues Involved:
1. Taxability of the gain of 10 grams of pure gold retained by the applicant.
2. Liability to pay GST on the gain of 10 grams of pure gold.
3. Determination of time and value of supply if GST is applicable.
4. Classification of the gain as goods or services for GST purposes.

Issue-wise Detailed Analysis:

1. Taxability of the Gain of 10 Grams of Pure Gold:
The applicant, a job worker, receives 1000 grams of pure gold from the principal for manufacturing gold ornaments. The principal allows a wastage provision of 40 grams, meaning the applicant must return 960 grams of gold ornaments. The applicant sub-contracts the job to another job worker, allowing a wastage of 30 grams, thereby retaining 10 grams of pure gold. The applicant contends that this 10 grams is not a consideration but a result of internal efficiency and bargaining power.

Observations:
The Authority noted that the provision for wastage is an industry-wide practice and is considered normal loss. However, the Handbook of Procedures by the Ministry of Commerce and Industry prescribes specific wastage norms for the gems and jewellery sector. The applicant's allowed wastage of 4% (40 grams) exceeds these norms. Therefore, the excess wastage (10 grams) retained by the applicant is not considered normal loss but a non-monetary consideration for the job work services provided.

Ruling:
The 10 grams of pure gold retained by the applicant forms part of the value of supply of job work services and is thus taxable.

2. Liability to Pay GST on the Gain of 10 Grams of Pure Gold:
The applicant argues that the 10 grams of gold retained is not a consideration and thus not subject to GST.

Observations:
The Authority determined that the excess wastage retained (10 grams) is a non-monetary consideration for the job work services. As per Section 15 of the GST Act, the value of supply includes any non-monetary consideration. Therefore, the applicant is liable to pay GST on this value.

Ruling:
The applicant is liable to pay GST on the 10 grams of pure gold retained as it forms part of the value of supply of job work services.

3. Determination of Time and Value of Supply:
If GST is applicable, the applicant seeks to know the time and value of supply.

Observations:
The value of supply shall be determined under Rule 27 of the CGST/WBGST Rules, 2017, which deals with the valuation of supply where the consideration is not wholly in money. The time of supply would be determined under Section 13(2) of the GST Act, which specifies the time of supply for services.

Ruling:
The value of the supply shall be determined under Rule 27 of the CGST/WBGST Rules, 2017, and the time of supply under Section 13(2) of the GST Act.

4. Classification of the Gain as Goods or Services for GST Purposes:
The applicant seeks clarity on whether the gain should be classified as goods (taxable at 3%) or services (taxable at 5%).

Observations:
The Authority clarified that the 10 grams of gold retained is part of the value of job work services provided by the applicant. As such, it should be classified as a service and taxed accordingly.

Ruling:
The value of the 10 grams of gold retained by the applicant shall be part of the value of job work services and taxable at 5% under SAC: 9988.

Conclusion:
The applicant is liable to pay GST on the 10 grams of pure gold retained as it forms part of the value of supply of job work services. The value of supply shall be determined under Rule 27 of the CGST/WBGST Rules, 2017, and the time of supply under Section 13(2) of the GST Act. The gain shall be classified as a service and taxable at 5%.

 

 

 

 

Quick Updates:Latest Updates