Making bullet proof body building on the motor vehicles is a 'service' and taxable @18 percent

The Hon'ble AAR Rajasthan in M/s. Jeet & Jeet Glass and Chemicals Private Limited[Advance Ruling No.RAJ/AAR/2020-21/08 decided on August 24, 2020] held that the activity of job work consisting of bullet proof body building on the motor vehicles provided by the Principal is a supply of service and attracts GST @18% (9% CGST +9% SGST or 18% IGST). It was further held that as per Section 97(2) of Central Goods and Services Tax Act, 2017 ('CGST Act') the issue of refund of tax is outside the purview of AAR.

Facts

M/s. Jeet & Jeet Glass and Chemicals Pvt. Ltd.('the Applicant') is engaged in the manufacture of bullet proof glass, bullet proof vehicles, lectern etc. in their factory. Besides, the Applicant was also undertaking armoring by body building on the chassis of vehicles (2.5 tonne capacity) supplied by the customers mainly the army or police etc. using bullet proof steel and glass. These vehicles are supplied free of cost to the Applicant.

For bullet proofing, the vehicles supplied by the customers, the Applicant removes the existing metal/tarpaulin cover on the cargo compartment except the flooring part so that body can be built on the cargo portion as per the specific requirement of the customer with bullet proof steel, glass, other fixtures to stack the weapons, seating for the personnel to be carried, providing firing ports, turrets etc.

Similar job work was provided on the chassis to HQ Northern Command ('Customer'). The Applicant charged 28% GST by classifying the work under the 'goods' category namely under the goods tariff heading no. 87079000.

The audit objection was raised at the Customer's end that the job work on the chassis supplied by the Customer for body building would attract tax of 18% and not 28% and the excess tax of Rs. 81,24,442/- paid by the Customer should be recovered from the Applicant. It was further stated that the activity of body building on the chassis owned and supplied by the Customer would be classifiable as supply of ‘service' under the service category 9988.

Issues

• Whether the activity of bullet proof body building on the motor vehicles provided by the Customer is classifiable as supply of service and chargeable @18% (CGST @9% and SGST @9%) under the provisions of the CGST Act
• Who will claim the refund of the excess tax paid by the Customer, the Applicant or the Customer himself?

Held

The Hon'ble AAR Rajasthan inAdvance Ruling No.RAJ/AAR/2020-21/08 decided on August 24, 2020has held as under:

Classification as supply of goods or services

• Found that, the Job Work as defined under Section 2(68) of the CGST Act has been considered as a supply of s That, the Para 3 of Schedule-II of CGST Act and Explanation to Section 143 of the CGST Act ibid also supports the same. 
• Further observed that, the Circular No. 52/26/2018-GST, dated August 9, 2018 has clarified that in cases where:

1. Bus body builder builds a bus, working on the chassis owned by him and supplies the built-up bus to the customer and charges the customer for the value of the bus would attract GST @28% as the supply made is that of bus.
2. Bus body builder builds body on chassis provided by the principal for body building and charges fabrication charges (including certain material that was consumed during the process of job-work) would merit classification as service and would attract GST @18%.

• Relied on the above Circular to hold that, the activity of job work consisting of fabrication including of bullet proof work done on chassis provided by the Principal (ownership of which always remains with Principal) is a supply of service taxable @ 18% (9% CGST + 9% SGST or 18% IGST).

Refund of Tax

• Observed that, as per Section 97(2) of the CGST Act, advance ruling can be obtained only regarding taxability, classification, rate of tax, exemption notification, determination of time and value of supply, input tax credit and registration etc. under GST for supply of goods and s
• Held that, ruling on issue of refund of tax is outside the purview of AAR as defined under Section 97(2) ibid.

Relevant Provisions

Para 12 of Circular No. 52/26/2018-GST, dated August 9, 2018

'12.1 Applicable GST rate for bus body building activity:

Representations have been received seeking clarifications on GST rates on the activity of bus body building. The doubts have arisen on. account of the fact that while GST applicable on job work services is 18%, the supply of motor vehicles attracts GST @ 28%.

12.2 Buses [motor vehicles for the transport of ten or more persons, including the driver] fall under headings 8702 and attract 28% GST. Further, chassis fitted with engines [8705] and whole bodies (including cabs) for buses [8707] also attract 28% GST. In this context, it is mentioned that the services of bus body fabrication on job work basis attracts 18% GST on such service. Thus, fabrication of buses may involve the following two situations:

1. Bus body builder builds a bus, working on the chassis owned by him and supplies the built-up bus to the customer, and charges the customer for the value of the bus.
2. Bus body builder builds body on chassis provided by the principal for body building, and charges fabrication charges (including certain material that was consumed during the process of job-work).

12.3 In the above context, it is hereby clarified that in case as mentioned at Para 12.2(a) above, the supply made is that of bus, and accordingly supply would attract GST @ 28%. In the instant case as mentioned at Para 12.2 (b) above, fabrication of body on chassis provided by the principal (not on account of body builder), the supply would merit classification as service, and 18% GST as applicable will be charged accordingly.'

Section 2(68) of CGST Act

'(68) 'job work' means any treatment or process undertaken by a person on goods belonging to another registered person and the expression 'job worker' shall be construed accordingly.'

Para 3 of the Schedule II of the CGST Act:

'ACTIVITIES OR TRANSACTIONS TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES

3. Treatment or process

Any treatment or process which is applied to another person's goods is treated as a supply of service.'

Explanation to Section 143 of the CGST Act

'For the purpose of job work, input includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or job worker.'

Section 97(2) of the CGST Act

'(2) The question on which the advance ruling is sought under this Act, shall be in respect of,-

(a) classification of any goods or services or both;

(b) applicability of a notification issued under the provisions of this Act;

(c) determination of time and value of supply of goods or services or both;

(d) admissibility of input tax credit of tax paid or deemed to have been paid;

(e) determination of the liability to pay tax on any goods or services or both;

(f) whether applicant is required to be registered;

(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.'