2025 (5) TMI 900 - AAR - GST

Job work as per the provisions of Section 2 (68) of the CGST Act or not - supply of service u/s 7 (1A) read with Para 3 of Schedule-Il of the CGST Act - tariff classification of the supply made by the Applicant - applicable rate of GST on the said supply - divergent views among the members. HELD THAT - Since both members of this authority have divergent views on the application filed by the applicant the matter is referred to Appellate Authority Jaipur in terms of Section 98 (5) of the CGST Act 2017.

Issues Presented and Considered

The core legal questions considered by the Authority for Advance Ruling (AAR) relate to the GST treatment of the applicant's activities involving fabrication and attachment of tipper bodies on chassis supplied by customers. Specifically, the issues are:

Whether the activity undertaken by the applicant qualifies as 'job work' under Section 2(68) of the CGST Act, 2017;
Whether the activity qualifies as a 'supply of service' under Section 7(1A) read with Para 3 of Schedule II of the CGST Act;
The tariff classification of the supply made by the applicant and the applicable GST rate on such supply.

Issue-wise Detailed Analysis

Issue 1: Qualification of the Activity as Job Work under Section 2(68) of CGST Act

Legal Framework and Precedents: Section 2(68) defines 'job work' as "any treatment or process undertaken by a person on goods belonging to another registered person." The CBIC clarifications, notably CBEC Flyer No. 27 dated 01.01.2018 and Circular No. 38/12/2018-GST dated 26.03.2018, elaborate that job work involves treatment or process on goods of another, and the job worker may use his own goods in providing such services. The Supreme Court's decisions emphasize strict and literal interpretation of tax statutes, precluding any intendment beyond the clear statutory language.

Court's Interpretation and Reasoning: The applicant receives chassis (goods) from Tata Motors on a free-of-cost basis, with ownership retained by Tata Motors. The applicant fabricates the tipper body using its own procured raw materials and attaches it to the chassis through welding and bolting, followed by painting. This process constitutes a treatment or process applied to goods belonging to another registered person, fulfilling the statutory definition of job work.

Key Evidence and Findings: The applicant provided detailed descriptions and documentary evidence including tax invoices, delivery challans, and photographs showing the fabrication and attachment process. The applicant's use of its own materials does not negate the job work nature, as clarified by CBIC circulars.

Application of Law to Facts: The activity clearly involves treatment/process on goods of another (the chassis owned by Tata Motors). The applicant's fabrication and attachment of the tipper body are specialized processes performed under the principal's direction. Hence, the activity qualifies as job work under Section 2(68).

Treatment of Competing Arguments: The jurisdictional officer contended that the activity involves a composite supply including supply of goods (the tipper body) and job work services, thus not qualifying purely as job work. However, the applicant's reliance on statutory definitions and CBIC clarifications supports the job work characterization.

Conclusion: The activity undertaken by the applicant qualifies as job work under Section 2(68) of the CGST Act.

Issue 2: Whether the Activity Qualifies as Supply of Service under Section 7(1A) read with Para 3 of Schedule II

Legal Framework and Precedents: Section 7(1) defines 'supply' broadly to include all forms of supply of goods or services for consideration. Section 2(102) defines 'services' as anything other than goods. Schedule II, Para 3, states that "any treatment or process which is applied to another person's goods is a supply of services." The GST Rate Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 classifies job work in relation to bus body building under Heading 9988 (Manufacturing services on physical inputs owned by others) attracting 18% GST.

Court's Interpretation and Reasoning: The applicant's activity of fabricating and attaching tipper bodies on chassis provided by Tata Motors fits squarely within the scope of a treatment/process on another's goods, thus constituting a supply of service. The CBIC Circular No. 52/26/2018-GST dated 09.08.2018 clarifies that where the chassis is owned by the principal and body building is done by another, the supply is a service attracting 18% GST.

Key Evidence and Findings: The applicant procures raw materials on its own account and uses its labor and machinery to perform the fabrication and attachment. The chassis ownership remains with Tata Motors, and the applicant charges consideration for the service rendered. Multiple GST Advance Rulings from various states support the classification as supply of service attracting 18% GST.

Application of Law to Facts: The applicant's activity is a supply of service under Section 7(1A) and Schedule II, Para 3, as it involves treatment on goods belonging to another. The applicable tariff heading is 998881 (Motor vehicle and trailer manufacturing services) under the GST Rate Notification.

Treatment of Competing Arguments: The jurisdictional officer argued that the activity constitutes a composite supply involving supply of goods (tipper body) and services, with the principal supply being goods, hence attracting 28% GST. The applicant contended that the principal supply is the service of job work, supported by statutory provisions and CBIC clarifications.

Conclusion: The activity qualifies as supply of service under Section 7(1A) read with Schedule II, Para 3, attracting GST at 18% under tariff heading 998881.

Issue 3: Tariff Classification and Applicable GST Rate

Legal Framework and Precedents: The GST Rate Notification classifies job work services related to bus body building under Heading 9988, with a rate of 18%. The 37th GST Council meeting reaffirmed that job work services related to body building shall continue to attract 18% GST. CBIC Circular No. 52/26/2018-GST distinguishes between two scenarios: (a) body builder owns chassis and supplies the built vehicle (28% GST), and (b) body builder builds body on chassis owned by principal (18% GST).

Court's Interpretation and Reasoning: Since the chassis is owned by Tata Motors and only fabricated bodies are attached by the applicant, the activity falls under scenario (b) attracting 18% GST. The applicant's supply is classified under tariff heading 998881 as manufacturing services on physical inputs owned by others.

Key Evidence and Findings: The applicant's invoices indicate supply of 'body' under tariff heading 8707 with GST @ 28% as a conservative measure. However, the clarified legal position and multiple Advance Rulings support classification as service under 998881 attracting 18% GST.

Application of Law to Facts: The activity is a job work service, not a sale of goods. The tariff classification under 998881 is appropriate, and the GST rate is 18% as per CBIC clarifications and GST Council decisions.

Treatment of Competing Arguments: The jurisdictional officer maintained that the activity is a composite supply with principal supply being goods (tipper body), attracting 28% GST. The applicant and several Advance Rulings reject this view, emphasizing that ownership of chassis remains with the principal and that the activity is a job work service.

Conclusion: The activity is classifiable under tariff heading 998881 and attracts GST at 18%.

Significant Holdings

"Section 2(68) of the CGST Act, 2017 defines job work as 'any treatment or process undertaken by a person on goods belonging to another registered person'. The ownership of the goods does not transfer to the job-worker but it rests with the principal."

"Any treatment or process which is applied to another person's goods is a supply of services." (Schedule II, Para 3)

"Services by way of job work in relation to bus body building shall include building of body on chassis of any vehicle falling under chapter 87 in the First Schedule to the Customs Tariff Act, 1975." (GST Rate Notification, Heading 9988)

"In case where the chassis is owned by the principal and the body building is done by the job worker, the supply would merit classification as service and 18% GST shall be charged accordingly." (CBIC Circular No. 52/26/2018-GST)

"Strict interpretation of a tax statute requires that the clear meaning of the words be followed and no intendment or presumption be read into the statute." (Supreme Court ruling cited)

"The GST Council decided that job work services in relation to body building shall remain unchanged at 18% GST." (37th GST Council Meeting Minutes)

"Where there is a composite supply comprising two or more supplies, one of which is a principal supply, the tax liability shall be that of the principal supply." (Section 8 of CGST Act)

"The activity of fabricating and attaching body to the chassis owned by vehicle manufacturer qualifies as job work service attracting GST @ 18%." (Numerous Advance Rulings cited)

Final Determinations

The applicant's activity of fabricating and attaching tipper bodies on chassis owned by Tata Motors qualifies as job work under Section 2(68) of the CGST Act.
The activity constitutes supply of service under Section 7(1A) read with Schedule II, Para 3, and is not a supply of goods.
The appropriate tariff classification is under Heading 998881 (Manufacturing services on physical inputs owned by others), and the applicable GST rate is 18%.
The competing view that the activity is a composite supply with principal supply of goods attracting 28% GST is not accepted by the applicant and is referred to the Appellate Authority due to divergent opinions within the AAR.

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