TMI BlogLEVY OF GST ON JOB WORKS FOR LIQUORX X X X Extracts X X X X X X X X Extracts X X X X ..... LEVY OF GST ON JOB WORKS FOR LIQUOR - By: - Dr. Sanjiv Agarwal - Goods and Services Tax - GST - Dated:- 5-4-2019 - - It is very common in alco-beverages industry to get brewing or manufacturing of liquor done on job-work basis. This becomes necessary in view of the limited number of capacity available within India and excessive regulation of this sector. No new licences of distilleries are gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted now a days by the State Governments. On the other hand, brand owners are always looking for capacity to brew its brands. Some of them have their own distilleries but that too is not sufficient to cater to their needs. Hence, comes the concept of manufacturing, brewing, distilling, bottling, packaging and supplying alco-beverages, including beer, on job-work basis from third party distillers ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled Contract Bottling Units (CBUs) or Tie-up Units (TUs) under a contract. Though supply of alco-beverages is outside the scope of Goods and Services Tax (GST) as it is a State subject, yet activities such a job-work involves services component and may be liable to levy of GST. This issue has been recently examined by the Authority for Ruling (AAR), Maharashtra in case of Crown Beers India P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt. Ltd. 2018 (12) TMI 843 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA and it was decided in favour of revenue. It was ruled that while supply of beer, per se, is not taxable under GST, job work services for manufacturing, brewing, packaging and supplying beer on job-work basis and consideration paid for such job-work being in course of furtherance of business of both parties, amounts to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of services under section 7 of CGST Act, 2017 and shall be liable to tax under GST laws and further such tax shall be payable by supplier of same, i.e., job worker. Such consideration may be a fixed fee per bottle or box and will not include other costs reimbursed to undertake job-work. What is taxable is the job-work which is a service provided by job worker to the brand owner for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which they are receiving consideration. In the instant case, the Authority observed that the principal has entered into an agreement for brewing/manufacturing, packaging and supplying beer only because job worker has surplus manufacturing and licensed capacity at its bottling unit. The brand owner would pay to the job worker such costs for purchasing the goods and were therefore, their own good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Costs were paid for purchasing the materials, arranging labour and other facilities / inputs by job worker on behalf of principal. It also mentioned that job worker 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nominating principal as the beneficiary. The cost of such insurance is also paid by the brand owner. Since the principal is paying costs to job work 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termine the taxability or otherwise under the GST law. It further observed that from the transaction, 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 principal to job-work. However, in respect of the fixed costs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the principal to job worker, it is very clear that the said fixed costs are paid to job worker because they are providing job work services to the principal. In this matter of payment of fixed costs, there is a supply of service by job worker to the principal in the form of brewing/ manufacturing, packaging and supplying beer. For these services rendered there is a consideration which flo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws from the principal to job worker in the form of fixed costs . The entire services rendered by job worker and the consideration paid by the principal for receiving such services is in the course of furtherance on business of both, the principal and job worker. Hence this amount is liable to tax under the GST Laws and such tax is payable by the supplier of service i.e. job worker. On nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f job-work, it was ruled that supply of beer as such is not a service. What is service in this case the entire gamut of brewing/ manufacturing, packaging and supplying beer by job worker to the principal, for which they are receiving fixed costs for job-work as discussed above. If the principal had brew/manufactured, packaged and supplied beer on their own account then their activity would not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 very clear that it is the job-work which is a service provided by job worker that is required to be taxed. - Reply By Raman Bajaj as = Sir, Please inform the rate at for such job work in liauor industry either 5% or 18%. Dated: 26-7-2019 - Scholarly art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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