2025 (7) TMI 385 - AAR - GST

Classification of service - Job-work - activity of providing service of regasification of LNG owned by GAIL/others would amount to rendering of service by way of job work within the meaning of section 2(68) of CGST Act 2017 GGST - service of re-gasification by way of job work - classifiable under serial no. 26(id) of heading no. 9988 of notification No. 11/2017-CT (R) dated 28.6.2017 as amended be chargeable to GST @ 12% or not - HELD THAT - The applicant in terms of his agreement with PLL pays re-gasification charges fixed facility charges and is also obliged to pay if not used charges. On weighing the contention of the applicant in this background it is found that the applicant is providing back-to-back job work to GAIL by getting their goods treated/processed through PLL. There is no dispute as far as the activity of PLL is concerned since the GAAR vide its order dated 11.8.2021 has already held the activity as job work. Now the applicant is getting GAIL s LNG converted into RLNG through PLL in terms of its agreement dated 18.11.2021. Further a conjoint reading of the two agreements viz dated 23.12.2013 and 11.8.2021 coupled with the fact that the applicant does not hold any ownership of the goods and that the GAAR vide its earlier order dated 11.8.2021 has already held the activity of the PLL as job work there are merit in the averment of the applicant that their activity of providing service of regasification of LNG owned by GAIL/others through PLL is a back to back job work and that the applicant adorns the role of a job worker of M/s. GAIL in so far as this transaction is concerned. The next averment raised by the applicant is that the service ought to be classified under 26(id) of notification No. 11/2017-CT (R). Since the LNG on which re-gasification is done belongs to GAIL who is a registered person and also because the services are other than those falling under serial no. 26(i) ia) (ib) (ic) (ica) we find that the service ought to be classified under 26(id) of notification No. 11/2017-CT (R) as amended.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Authority for Advance Ruling (AAR) were:

(i) Whether the applicant's activity of providing re-gasification services of LNG owned by GAIL or other entities amounts to rendering of service by way of "job work" within the meaning of section 2(68) of the Central Goods and Services Tax (CGST) Act, 2017 and the Gujarat Goods and Services Tax (GGST) Act?

(ii) If the activity qualifies as job work, whether such re-gasification service is classifiable under serial no. 26(id) of heading 9988 of notification No. 11/2017-CT (Rate) dated 28.6.2017 (as amended), and thus chargeable to GST at the rate of 12%?

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Whether the applicant's re-gasification service amounts to "job work" under section 2(68) of CGST Act?

Relevant legal framework and precedents:

Section 2(68) of the CGST Act defines "job work" as "any treatment or process undertaken by a person on goods belonging to another registered person." The Circular No. 38/12/2018-GST dated 26.3.2018 clarifies that job work involves processing or treatment of goods belonging to another registered person, and the job worker may use his own goods in addition to the principal's goods. The Circular also permits multiple job work arrangements, including sending goods from one job worker to another under challan.

Notification No. 11/2017-CT (Rate) dated 28.6.2017, as amended, provides concessional GST rates on services by way of job work under heading 9988, with serial no. 26(id) covering "services by way of job work other than those specifically enumerated."

Prior rulings and case law cited by the applicant include decisions affirming the principle that classification beneficial to the assessee should be adopted, and that the contractual arrangement and title ownership are crucial in determining tax liability.

Court's interpretation and reasoning:

The AAR examined the contractual arrangements between the applicant, Petronet LNG Limited (PLL), and GAIL. The applicant supplies LNG owned by GAIL to PLL, which undertakes re-gasification and returns RLNG. The applicant does not own the LNG or RLNG at any stage, and the risk during processing lies with PLL. The applicant pays PLL for the re-gasification service and raises tax-compliant invoices to GAIL.

The AAR noted that PLL's activity of re-gasification was previously held by the Gujarat Authority for Advance Ruling (GAAR) to be job work liable to CGST @ 6%. The applicant's arrangement is a back-to-back job work model where the applicant acts as an intermediary ensuring PLL performs the job work for GAIL's goods.

Applying the definition under section 2(68), the AAR found that the applicant undertakes a treatment or process (re-gasification) on goods (LNG) belonging to another registered person (GAIL). The applicant's role in ensuring PLL performs the job work, coupled with the absence of ownership of goods and the contractual obligations, satisfies the conditions for job work.

Key evidence and findings:

• The agreements dated 23.12.2013 (between applicant and PLL) and 18.11.2021 (between applicant and GAIL) clearly establish the contractual framework and obligations.
• PLL's prior ruling confirming its re-gasification as job work.
• Applicant's payment of re-gasification and fixed facility charges to PLL.
• Retention of title of LNG and RLNG with GAIL throughout the process.
• Reliance on Circulars clarifying the scope of job work and multiple job work arrangements.

Application of law to facts:

The AAR applied the statutory definition of job work and relevant circulars to the factual matrix of the agreements. The applicant's role as a facilitator ensuring PLL performs job work on goods owned by GAIL fits squarely within the definition of job work. The arrangement is a back-to-back job work wherein the applicant is effectively the job worker of GAIL.

Treatment of competing arguments:

While the applicant argued for classification under job work benefiting from concessional GST rates, the AAR considered the prior ruling on PLL's activity and the contractual terms to confirm the applicant's role. The AAR did not find any contradictory submissions undermining the job work classification.

Conclusions:

The applicant's activity of providing re-gasification service of LNG owned by GAIL/others amounts to rendering of service by way of job work under section 2(68) of the CGST Act and GGST Act.

Issue (ii): Classification of the re-gasification service under notification No. 11/2017-CT (Rate) and applicable GST rate

Relevant legal framework and precedents:

Notification No. 11/2017-CT (Rate) dated 28.6.2017, as amended, provides concessional GST rates for services by way of job work under heading 9988. Serial no. 26 lists various categories of job work services with corresponding GST rates. Entry 26(id) covers "services by way of job work other than those specifically enumerated" and carries a GST rate of 6% CGST (12% CGST+SGST).

Circular No. 126/45/2019-GST dated 22.11.2019 clarifies that entry 26(id) applies only to job work services as defined in section 2(68), and excludes services covered under entry 26(iv) which relate to services on inputs owned by persons not registered under CGST.

Court's interpretation and reasoning:

Since the LNG subjected to re-gasification belongs to GAIL, a registered person, and the activity qualifies as job work, the service falls within the scope of serial no. 26(id) of heading 9988. The applicant's service is not covered under the other specific sub-entries (26(i), (ia), (ib), (ic), (ica)) and thus defaults to 26(id).

The AAR rejected any classification under more general entries such as serial no. 35, preferring the more specific classification under 26(id) as per the principle of specific entries prevailing over general ones.

Key evidence and findings:

• Ownership of goods by GAIL, a registered person.
• Prior ruling on PLL's activity as job work under 26(id).
• Applicant's role as job worker on behalf of GAIL.
• Relevant circulars clarifying the scope and applicability of the notification entries.

Application of law to facts:

The service of re-gasification by the applicant, being job work on goods owned by a registered person, is classifiable under serial no. 26(id) of heading 9988 and attracts GST at 12%.

Treatment of competing arguments:

The applicant's reliance on case law and circulars supporting the classification under 26(id) was accepted. No opposing classification was found to be more appropriate.

Conclusions:

The re-gasification service by way of job work is classifiable under serial no. 26(id) of heading 9988 of notification No. 11/2017-CT (Rate) dated 28.6.2017 as amended and is chargeable to GST at 12%.

3. SIGNIFICANT HOLDINGS

The AAR held:

"The applicant's activity of providing service of regasification of LNG owned by GAIL/others amounts to rendering of service by way of job work within the meaning of section 2(68) of CGST Act, 2017 & GGST."

"The said service of re-gasification by way of job work is classifiable under serial no. 26(id) of heading no. 9988 of notification No. 11/2017-CT (R) dated 28.6.2017 as amended & is chargeable to GST @ 12%."

Core principles established include:

• The definition of job work under section 2(68) requires a treatment or process on goods belonging to another registered person.
• Back-to-back job work arrangements are permissible and recognized under GST law.
• Classification under GST notifications must prefer specific entries over general ones.
• The ownership of goods is critical in determining the applicability of job work provisions and related GST rates.
• Contractual obligations and the flow of title and risk are material in determining the nature of services rendered.