Process undertaken which does not result in a new product will come under the purview of the job work
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Case Details: |
Fine Electro Coating |
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Appeal No.: |
GST-ARA-81/2019-20/B-70 |
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Ruling pronounced by: |
GST AAR Maharashtra |
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Date of Ruling: |
11-10-2021 |
Brief Facts:
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The applicant is engaged in rendering premium CED coating and Powder coating services. The firm also undertakes metal finishing coating services for various products. The applicant submitted that all products received by it, whether for CED Coating or for Powder Coating are received through Delivery Challan only and goes through phosphating treatment, which helps mainly clean the part, and then it goes through either CED Line for final coating or powder coating gun machine. |
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Phosphating treatment does not result in any new products, rather it helps achieve corrosion resistance, or as a foundation for subsequent coating and painting which is actually happening in this case as per the submission made by the applicant. The basic characteristics of the product have not been lost. Thus, the applicant contended that they are job workers in terms of the provisions of the CGST Act, 2017. |
Question before Authority:
The basic issue before this Authority is whether the activity/process carried out by the applicant on goods received from its clients amount to job work and if yes, whether the provisions of Notification No. 20/2019 Central Tax (Rate) dated 30th September 2019 is applicable in this case.
Observations of the Authority:
Section 143(1)(a) of the CGST Act, 2017 specifies that the material sent out for job work should be, brought back by the principal, after completion of job work or otherwise, within one year of the goods being sent out. From the submissions made by the applicant, we find that:
- The process is undertaken by the applicant on the goods belonging to another person registered under the GST Act;
- Only job charges in the form of processing charges are received by the applicant;
- The goods after processing are returned back within one year;
- No new product emerges after the process is carried out by the applicant on the goods.
Ruling:
Since no new product comes into existence after the process conducted by the applicant on the goods supplied by its principals, therefore the process undertaken will come under the purview of the job work as defined under section 2(68) of the CGST Act, 2017. Thus, in view of the above, we find that the applicant is only a job worker and as a job worker, carries out processes on goods supplied by its principals.
The second question raised by the applicant is whether Notification No. 20/2019- Central Tax (Rate) dated 30.09.2019- where GST rate on Job work is reduced to 6% from 9% is applicable to them or not.
Observations of the Authority:
Entry at item (id) under heading 9988 of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 was inserted with effect from 01.10.2019, by Notification No. 20/2019- Central Tax (Rate) dated 30.09.2019. This entry reads as follows:
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Sl. No. |
Chapter, Section, Heading, Group or Service Code (Tariff) |
Description of services |
Rate % |
Condition |
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26 |
Heading 9988 (Manufacturing services on physical inputs owned by others) |
(id) Services by way of job work other than (i), (ia), (ib), and (ic) |
6% |
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Note: Refer to the aforesaid notification for the description of entry at (i), (ia), (ib), and (ic).
Ruling:
The services provided by the applicant do not fall under (i), (ia), (ib), and (ic) of the above-mentioned notification. We have already found that the services provided by the applicant are in the nature of job work. Therefore, we find that the subject supply of services will be covered by the residuary entry at item (id) of the said notification. As such, the GST rate on job work in the case of the applicant will be 6% instead of 9% from the date of applicability of aforesaid notification.
Disclaimer: The article is based upon the ruling of the Advance Ruling Authority, Maharashtra, and is meant for informative purposes only. Readers are requested to act diligently and under the consultation of a professional before applying the information contained in this article.
