The Gujarat Authority of Advance Ruling (AAR) in its recent ruling in the case of M/s. Uday Laxman Jadhav has interalia ruled that service of refine of old gold jewellery or coins/ biscuit as well as testing of purity of gold will be covered under Mixed supply in terms of Section 2(74) of CGST Act, 2017 and thus the highest GST rate will be applicable which is 18 % {CGST 9%+9% SGST}.
Facts of the case:
- The applicant M/s. Uday Laxman Jadhav is registered under GST law.
- The applicant submitted that they are engaged in the providing services of Testing and Refinery of gold. The applicant submitted that they receive gold jewellery or coins/ biscuits, after melting old jewellery from service recipients to refine pure gold and testing the purity of gold.
- All old gold jewellery or coins/biscuits collected by applicants are placed in a vessel made up of magnesium and heated and melted at a temperature between roughly 1000 and 12000 degree Celsius in the furnace.
- During the process all metals absorb in the alloy and leave only gold and silver. The available gold and silver is heated in Nitric acid to separate the silver from gold. The remaining pure gold is weighted to determine the percentage of purity.
- Upon completion of process and analysis, the applicant issued the certificate of purity of gold. After that, a certificate of purity with pure gold will be sent to the recipient of service.
- This pure gold is used by service recipients in the further process of making new jewellery or coins/biscuits.
Issues on which Ruling was sought:
The applicant sought the Advance Ruling on the various issues which are given below:
i) Whether services of refining of gold from old jewellery and coins/biscuits, and 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 people and unregistered persons.
ii) What is the classification and rate of GST for services of testing of purity of gold.
iii) If the applicant renders the service of refinement of old gold jewellery or coins/ biscuit as well as testing the purity of gold, then it will be considered as composite supply? If yes, what is the rate of GST applicable on it?
Order of Gujarat AAR: Deliberation and Ruling
- On perusal of the relevant provisions of CGST Act, it can be stated that if all of the following conditions are fulfilled, the transaction would qualify as an activity of Job work and consequently the Principal will be allowed to send the goods without payment of tax viz :
(i) Treatment or process should be undertaken by a person;
(ii) Such treatment or process should be on goods, and
(iii) These goods should belong to another registered person.
- The 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”. The said service provided to un-registered person is treated as services on physical input (goods), which are owned by persons other than those registered under the CGST Act,2017.
- Service of refining pure gold from old jewellery and coins/biscuits and converting the jewellery into coins/biscuits, as per the specification of the registered person and un-registered person, merits classification under Service Accounting Code (SAC) 9988.
- In view of the entry No 21 of Notification No. 11/2017-CT (Rate) dated 28.06.2017, the rate of GST for the service of testing of purity of gold would be 18 % i.e. {CGST 9% +SGST 9%}.
- Hence, service of refining of pure gold from old jewellery and coins/biscuits owned by unregistered person is covered under entry No. (iv) of aforesaid Notification No. 11/2017-CT (rate) dated 28.06.2017 and accordingly, GST rate would be 18 % { 9% CGST + 9% SGST}.
- The services of refining and testing combined would be a mixed supply. Thus would be exigible to highest rate of tax viz 18 % { 9% CGST + 9% SGST}.
In view of above deliberations the Coram consisting of Sanjay Saxena and Mohit Aggarwal held that the Refining of gold from old jewellery and coins/biscuits, and Conversion of old gold jewellery into coins/biscuits as per specification given by service recipient; 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.
It was also held that 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) ( c) of Notification No. 11/2017-CT (Rate) dated 28.06.2017. The rate of GST for the above service provided to un-registered person is liable to 18% { 9% CGST+ 9% SGST} in terms of Sr. No. 26 (iv) of Notification No. 11/2017-CT (Rate) dated 28.06.2017.
The AAR also held that the classification of testing of purity of gold is 9983 and GST rate is liable to 18 % { 9% CGST+ 9% SGST} in terms of Sr. No. 21 of Notification No. 11/2017-CT (Rate) dated 28.06.2017.
The Authority further held that the service of refine of old gold jewellery or coins/ biscuit as well as testing of purity of gold will be covered under Mixed supply in terms of Section 2(74) of CGST Act, 2017. The GST rate would be 18 % {CGST 9%+9% SGST}.
READ / DOWNLOAD ORDER:
Read quality articles on GST authored by national level experts on the one and only exclusive GST portal CLICK HERE
***
Subscribe our portal and get FREE GST e-books , articles and updates on your e-mail.
Resolve your GST queries from national level experts on GST free of cost.
Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
