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2023 (2) TMI 873 - AUTHORITY FOR ADVANCE RULING, WEST BENGALSupply or not - taxability of 10 grams of pure gold, retained by the applicant, in the course of manufacture of gold jewellery from 1000 gm of pure gold provided to the applicant by his principal - contention of the applicant in this regard is that the provision for allowing such wastage 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. HELD 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 of the applicant has been asked to provide a certificate from the competent authority 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 goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply”. In the instant case, the applicant agrees to provide job work services for manufacturing of gold ornaments to his principal against consideration which is in money. At the same time, the applicant has been allowed wastage by his principal on account of manufacturing loss which exceeds the wastage norm limit that enables the applicant to retain certain amount of pure gold. The process of making gold jewellery involves melting, cutting, moulding, polishing etc. which may result in some amount waste of gold. However, retaining a certain amount from the input (10 gm of pure gold for the instant case) before it put into the manufacturing process cannot be treated as ‘wastage’ or ‘normal loss’ - here the price is not the sole consideration for the supply and the value of such excess wastage allowed to the applicant shall be considered as non-monetary consideration for the purpose of determination of value of supply of job work services provided by the applicant to his principal. Therefore, the value of supply of services, i.e., making charges on which the applicant is liable to pay tax @ 5% would be determined as per provision of section 15 of the GST Act read with rule 27 of the CGST/ WBGST Rules, 2017. Since the applicant admittedly retains 10 gm of pure gold on account of wastage which is beyond the permissible limit of wastage in the nature of normal loss, the value of pure gold so retained by the applicant shall form a part of value of supply of job work services.
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