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2020 (12) TMI 190 - AAR - GSTRate of tax - mixed supply or not - Job work activity or not - applicant does job work on the materials and design belonging to another registered person - applicant submits that the activities in terms of the above contract should be treated as job work. HELD THAT:- The applicant’s activities can be segregated into (1) job-work of fabrication on the material provided by the Principal and delivery thereof, (2) supply of paint on the fabricated structures and (3) works contract involving the application of a coat of paint on the erected structures and thereby improving / maintaining an immovable property. It appears from the payment schedule (Clause 29) that the applicant receives 80% of the payment on delivery of the fabricated structures at the site. At the same time, the balance amount shall not be released till the applicant applies the final coat on the erected structures and the competent authority issues the completion certificate. Moreover, although the applicant is not responsible for erection of the fabricated structures, retention money @ 5% of the value of the work, deducted from each running bill, will be released only after successful completion of each span, which includes erection/launching of the spans (Clause 30). Therefore, the works contract part of the contract is inseparably linked with the job-work portion, and they cannot be treated as two separate contracts. Notification No. 5050-F(Y) dated 16/08/2017 of the Government of West Bengal clarifies that works involving the supply of taxable goods along with the labour to any movable property (e.g. servicing of motor vehicles with motor parts, AMC for computers or AC machines or generator, repair of furniture etc.) are composite supplies, as the supply of goods and labour are naturally bundled and made in conjunction with one another. The principal supply, according to the said notification, is determined by the predominant nature of the contract. For example, in the case of servicing of motor vehicles or AMCs, the principal supply is ‘service’. On the other hand, in a contract for supply-cum-installation of an AC machine, the principal supply will be the AC machine. The contract combines two separate services: (1) the job work of fabrication of steel structures and delivery thereof at the site with incidental supply of paint, and (2) works contract of applying a coat of paint to the steel structures after erection. Although they are supplied in conjunction with each other at a single price, they are not naturally bundled. The job work of fabrication ends with the delivery of the fabricated structures at the site. The works contract of applying paint to the erected structures is a separate supply made in conjunction with the job work. It is, therefore, a mixed supply. The taxability of the mixed supply depends on the applicable rate of tax on each of the two supplies. Being supply of the manufacturing service (SAC 9988) to a registered taxable person, the supply of the job work is taxable @ 12% in terms of Sl No. 26 (id) of the Rate Notification - The applicant’s works contract service, being that of a sub-contractor engaged by the main contractor, therefore, is taxable @ 12% in terms of Sl No. 3(ix) of the Rate Notification. The mixed supply is, therefore, taxable @ 12% in terms of the provisions under section 8(b) of the GST Act.
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