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2018 (12) TMI 843 - AAR - GSTLevy of CGST/MGST/IGST - fixed fee received by the PIL as a consideration for brewing / manufacturing, packing and supply of Products i.e. alcoholic liquor for human consumption - Scope of supply - service or not? - Held that:- The applicant has entered into an agreement for brewing/manufacturing, packaging and supplying beer only because PIL has surplus manufacturing and licensed capacity at its bottling unit. As per the agreement the applicant would pay to PIL such costs for purchasing the goods mentioned above and therefore they are effectively their own goods. In fact the agreement mentions that PIL shall maintain in force, at all times during the term Of the Agreement, full and complete insurance cover for Products, raw materials and ingredients used in the Manufacture of Products and work in process in relation thereto by nominating Crown as the beneficiary. Since the applicant is paying costs to PIL for purchase of the said goods, there is no supply rendered by them to each other since as per the definition of supply of services. In the GST Law, the taxable event would be SUPPLY. Hence it is the most important part of the GST law, as it will determine the taxability or otherwise under the GST law. The definition of Supply in the CGST Act, is an inclusive one. It is contained in Section 7 of the CGST Act. Apart from Section 7, Schedules I to Ill are provided which explain various provisions related to supply. From the transaction between the applicant and PIL, it is clear that in respect of the ‘costs’ paid and received there is no supply of goods/ services in the form of sale, transfer, barter, exchange, etc. and therefore there is no requirement to pay GST on such costs paid by the applicant to PIL However in respect of the ‘fixed costs’ paid by the applicant to PIL, it is very clear that the said fixed costs are paid to PIL because they are providing job work services to the applicant - For these services rendered there is a consideration which flows from the applicant to PIL in the form of ‘fixed costs’. The entire services rendered by PIL and the consideration paid by the applicant for receiving such services is in the course of furtherance on business of both, the applicant and PIL. Hence this amount is liable to tax under the GST Laws and such tax is payable by the supplier of service i.e. PIL. What is service in this case the entire gamut of brewing/ manufacturing, packaging and supplying beer by PIL to the applicant, for which they are receiving fixed costs for job work as discussed above. If the applicant had brew/manufactured, packaged and supplied beer on their own account then their activity would not have been liable to tax under the GST laws since the supply of alcoholic liquor for human consumption is not taxable under the GST laws - it is the job work which is a service provided by PIL that is required to be taxed. Ruling:- The taxes have to be discharged by PIL on the fixed fee received and not on costs received. Supply of beer per se is not taxable under GST. What is taxable in the subject case is the job work which is a service provided by PIL to the applicant, for which they are receiving consideration.
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