2023 (1) TMI 976 - AAR - GST
Classification of supply - Composite supply or not - Job-Work or not - activity of tanning, with chemical consumption - treatment or processing undertaken on goods owned by other person - to be chargeable under the item i(e) of the Heading 9988 ie., or Manufacturing Services On Physical Inputs (Goods) owned by Others and if not what would be the applicable tax rate or not? - HELD THAT:- In the instant case, on perusal of the invoices of job work and flowchart of the process submitted by the Applicant, it is clear that hides and skins (Chapter 41) are received from Applicant's customer for the job work of tanning and that certain tanning chemicals are added to assist the tanning process. After various processes, the raw hides and skins (Chapter 41) are converted in to finished leather (Chapter 41) and returned back to the Applicant's customer. The Customer (M/s Century Overseas -who is a registered person-Principal) while transporting the raw hides and skins and receiving the finished product, does not transfer the ownership to the Applicant. This is apparent in the Job Tanning order given by the customer (M/s Century Overseas). The terms and conditions stipulate that Applicant (M/s Zuha Leathers) should return the goods without any damage. Hence, it is clear that the Applicant in the instant case is the job worker, who has to process the raw hide supplied by the Principal and after tanning process (job work) return the same to the Principal.
If the activity of the Applicant is a service by way of treatment or processing undertaken by a person on goods belonging to another registered person, it is rightly classifiable as processing of hides, skins and leather falling under Chapter 41 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and as per (i)(e) (para 6.7) and applicable CGST rate is 2.5% and applicable SGST rate is 2.5%. However, if the activity of Applicant is undertaken on physical inputs (goods) which are owned by persons other than those registered under the CGST Act, then it falls within entry at item (iv) and applicable CGST rate is 9% and applicable SGST rate is 9%.