9911796707
TMI Blog2021 (1) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial to calculate what percentage of pure gold it is. "Karat" a unit of measurement used to know the how much gold is in an alloy. A "karat" is one part out of 24. Pure gold is converted into 22K gold for manufacturing of gold jewellery or coins/ biscuits. To make it harder, manufacturers use other metals like platinum, silver or copper and this gold alloy can be used to make jewellery as well as coins/biscuits. 2.2 Process of refine gold:- The most accurate methods of refining gold is the fire assay method. This method is one of the industry standard processes for refining the gold. This process can require highly skilled workers to carry out meticulously. 3. The applicant submitted that they receive gold jewellery or coins/ biscuits (after melting old jewellery) from service recipient to refine pure gold and testing of purity of gold. All old gold jewellery or coins/biscuits collected by applicant are placed in vessel made up of magnesium and heated and melted at a temperature between roughly 1000 and 12000 degree Celsius in furnace. During the process all metals absorbs in the alloy and left only gold and silver. The available gold and silver is heated in Nitric acid to sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2017 (68) "Job work" means any treatment or process undertaken by a person on goods belonging to another registered person and the expression job work shall be construed accordingly; 6.2 Treatment or process (i) Definition of treatment as per Lexico UK Dictionary "Treatment" means the use of a chemical, physical or biological agent to preserve or give particular properties to something. (ii) Definition of "process" as per Collins English Dictionary A "process" is a series of actions which are carried out in order to achieve a particular result. 6.3 Section 2(94) of CGST Act, 2017 (94) "registered person" means a person who is registered under Section 25 but does not include a person having a Unique Identity Number. From the above definitions, it is clear that the process of refine gold belonging to a registered person is covered under the service of Job work. 6.4 Classification and rate of tax The applicant submitted that in view of the above, their interpretation regarding classification and rate of tax are given below: a. Service of refine gold provided to registered person (Not. No. 11/2017-CT (Rate) dated 28.06.2017 and read with Notification No. 11/2017-ST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition 21 Heading 9983 Other professional, technical and business services (iv) Other professional, technical and business services other than (i) and (ia) above and serial number 38 below. 18 8. The relevant provisions of GST law for services of refine of gold and testing of purity of gold as composite supply:- 8.1 Section 8(a) of CGST Act, 2017 The tax liability on a composite or a mixed supply shall be determined in the following manner, namely; (a) Composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and ................. 8.2 Section 2(30) of CGST Act, 2017 (30) "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins/biscuits as per the specification given by service recipient. Further, they are engaged in the work of testing of purity of gold and issue the certificate of purity of gold to the customer, who have supplied the gold to the applicant. Also the applicant carried out testing of purity of gold which are converted into pure gold from old gold (22K gold) jewellery or coins/ biscuits after carrying out the certain process to extract the pure gold. 13. We observe that the applicant has elaborated the process of conversion of old jewelley (22k) gold /coins/biscuits into pure gold of 24K. The applicant has submitted that following process is required to convert the old jewelley (22k) gold /coins/biscuits into pure gold of 24K. Purpose of refine gold:- Gold jewellery is not always all pure gold. The reason is that gold of jewellery is soft. For this reason, refiner must evaluate material to calculate what percentage of pure gold it is. "Karat" a unit of measurement used to know the how much gold is in an alloy. A "karat" is one part out of 24. Pure gold is converted into 22K gold for manufacturing of gold jewellery or coins/ biscuits. To make it harder, manufacturers use other metals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the classification of Service and rate for the service provided to registered and unregistered person. 17. To decide whether the said activity gets covered under the definition of job- work or otherwise, we have to refer to the definition of Job-work as provided under CGST Act and Rules, 2017. 17.1 Job-work is defined under Section 2(68) of Central Goods and Service Tax Act, 2017, which is read as under: (68) "Job work" means any treatment or process undertaken by a person on goods belonging to another registered person and the expression job work shall be construed accordingly; 17.2 From the above definition, it is clear that job work involves (i) two persons, (ii) goods and (iii) process/treatment on the goods. Also, the procedure for job work is prescribed under Section 143 of CGST Act and Rule 45 of the CGST Rules, in terms of Section 143(1)(a) : (1) A registered person (hereafter in this section referred to as the 'principal') may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall, - (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure gold from old gold jewellery and coins/biscuit and converting the old gold jewellery into coins/biscuits, as per the specification of the customer. Both the said processes are being done on old jewellery and/or coins/biscuits i.e. on the goods and the goods i.e. old jewellery and/or coins/biscuits belonging to another registered person. The applicant being a job worker satisfies all the necessary ingredients to carry out job work activity. Hence, we can conclude that the said process of refining of pure gold on old jewellery or coins/biscuits and converting the old gold jewellery into coins/biscuits, as per the specification of the recipient, who is a registered person, gets covered under the definition of "Job work". 19. The applicant also carries out the said process of refining the pure gold from old jewellery and coins/biscuits and converting the old gold jewellery into coins/biscuits as per the specification of the customer belonging to unregistered person. The said activity of refining of pure gold from old jewellery and coins/biscuits and converting the old gold jewellery into coins/biscuits as per the specification of the recipient, who is a un-registered person does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classification under Service Accounting Code (SAC) 9988. 21. To determine GST rate of service classifiable under SAC 9988, we refer the Notification No. 11/2017-CT (Rate) dated 28.06.2017, as amended. The relevant entry No. 26 of Notification No. 11/2017-CT(Rate), as amended vide various Notifications, is as under : 26 Heading 9988 (Manufacturing services on physical inputs (goods) owned by others) (i) Services by way of job work in relation to- (a) Printing of newspapers; "(b) Textiles and textile products falling under Chapter 50 to 63 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975);"; "(c) all products other than Diamonds falling under Chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975);"; 2.5 - (d) Printing of books (including Braille books), journals and periodicals; "(da) printing of all goods falling under Chapter 48 or 49, which attract CGST @ 2.5 per cent. or Nil;" (e) Processing of hides, skins and leather falling under Chapter 41 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). "(f) all food and food products falling under Chapters 1 to 22 in the First Schedule to the Customs Tariff Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been raised with regard to scope of the notification entry at item (id) under heading 9988 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 inserted with effect from 1-10-2019 to implement the recommendation of the GST Council to reduce rate of GST on all job work services, which earlier attracted 18% rate, to 12%. It has been stated that the entry at item (id) under heading 9988 of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 inserted with effect from 1-10-2019, prescribes 12% GST rate for all services by way of job work. This makes the entry at item (iv) which covers "manufacturing services on physical inputs owned by others" with GST rate of 18%, redundant. 2. The matter has been examined. The entries at items (id) and (iv) under heading 9988 read as under: (3) (4) (5) (id) Services by way of job work other than (i), (ia), (ib) and (ic) above; 6 - (iv) Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ib), (ic), (id), (ii), (iia) and (iii) above. 9 - 3. Job work has been defined in CGST Act as under. "Job work means any treatment or processing undertaken by a person on goods belonging to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexure to the Notification No. 11/2017-CT (rate) dated 28.06.2017 for the classification of the said service. The relevant entry No. 296 of the said Annexure is read, as under: 296 Heading 9983 Other professional, technical and business services 324 Group 99834 Scientific and other technical services 325 998341 Geological and geophysical consulting services 326 998342 Subsurface surveying services 327 998343 Mineral exploration and evaluation 328 998344 Surface surveying and map-making services 329 998345 Weather forecasting and meteorological services 330 998346 Technical testing and analysis services 331 998347 Certification of ships, aircraft, dams, and the like 332 998348 Certification and authentication of works of art 333 998349 Other technical and scientific services nowhere else classified Hence, service of testing of purity of Gold merits classification under Service Accounting Code (SAC) 9983. 25. To determine GST rate of service classifiable under SAC 998 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how to determine whether supplies are naturally bundled in the ordinary course of business as below: "Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators some of which are listed below: - * The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package, then such a package could be treated as naturally bundled in the ordinary course of business. * Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. * The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either both the service or one service on their old jewellery and coins/biscuits. 29.3 There should be one principal supply. The applicant is providing services of (i) refining of pure gold from old jewellery and coins/biscuits and (ii) testing of purity of gold to their customer. Therefore, these services can be provided by the applicant independently. As such it totally depends upon the customer whether he wants to avail the service of refining of pure gold from old jewellery and coins/biscuits along with testing of purity gold or not. The "Principal supply" is defined under Section 2(90) of CGST Act, 2017 and same is reproduced as under: Section 2(90) of CGST Act, 2017 (90) "Principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. As per the aforesaid definition of Principal supply, one of the supply of goods or service should have predominant element and other supply of goods or service should be of ancillary of principal supply. In the instant case, both the supply of service refining of pure gold and testing of purity of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the foregoing paras, it has already been ruled out that both the supply of services do not get covered under the definition of Composite Supply as defined in Section 2(30) of CGST Act, 2017. As the transaction put before us satisfies all the ingredient of 'mixed supply', we conclude that the transaction would get covered under the definition of 'mixed supply' as defined in Clause 74 of Section 2 of the GST Act. 32. To determine the tax liability for the supply of both the services (i) refining of pure gold from old jewellery and coins/biscuits and (ii) testing of purity of gold which are covered under Mixed supply, we refer to the Section 8 of CGST Act, 2017. Section 8 of CGST Act, 2017 is produced as under: 8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. 32.1 In view of the above Section 8(b) of CGST Act, 2017, the rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation has not submitted any facts with regard to the said question. Therefore, in absence of any facts in this regard, we members of authority are not in position to give any ruling in respect of this question. Therefore, we members of the authority restrict ourselves to give any ruling on the said question. 35. In the light of the above, we rule as under : RULING 1. Whether services of; (i) Refining of gold from old jewellery and coins/biscuits, and (ii) Conversion of old gold jewellery into coins/biscuits as per specification given by service recipient; Provided to registered person will be covered under the definition of job work under section 2 (68) of CGST Act, 2017? What is the classification and rate of tax for these services provided to registered person and unregistered person? Ans. Above services provided will be covered under the definition of Job work under Section 2(68) of CGST Act, 2017 only when provided to registered person and not as Job work when provided to un-registered person. Above Services merit classification under SAC 9988. The rate of GST for the above service provided to registered person is 5% { 2.5% CGST+ 2.5% SGST} in terms of Sr. No. 26 (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
