The Gujarat Authority of Advance Ruling (AAR) has in its recent order on the application filed by M/s. AB N Dhruv Autocraft (India) Pvt. Ltd has ruled that 18% of GST is applicable to bodybuilding and fabrication on chassis provided by owners and 28% GST on supply of complete body built motor vehicle.
Fact of the case:
- The Applicant, M/s. AB N Dhruv Autocraft (India) Pvt. Ltd is providing service of body building on motor vehicles by fabrication and charges fabrication charges on lump sum basis.
- They are providing manufacturing service or body building services on physical inputs (goods) or chassis owned by others and provided by the owner for body building and applicant charges lump-sum fabrication charges including certain material that would be consumed during the process of bodybuilding.
- The applicant is carrying out this activity for manufacturing of tipper, tanker, trailer etc. on chassis provided by the owners of such vehicles.
- The applicant also receives the vehicles, which were damaged in the accident for repairing work. These vehicles are supplied by their owner and applicant carries out repairing work on such damaged vehicle. The applicant in such repairing work uses their labour and material (goods), which are required for repairing and charges lump sum price, which includes cost of material and labour.
Issues on which ruling was sought:
The applicant sought advance ruling on the issue whether the treatment or process of body building by fabrication and other processes carried out on chassis of motor vehicle owned by others is supply of services.
The applicant also raised the issue that would be the classification and applicable rate of tax for the activity of accident repairing job on the vehicle supplied by the owner for such job if a lump sum price is charged that includes cost of material and labour
Contention of the applicant:
- The applicant contended that the activity of body building and fabrication on the chassis provided by the principal (not on account of body builder), supply would merit classification as service and 18% GST as applicable will be charged. The activity of body building shall not be treated as supply of goods or motor vehicle as the activity carried out by them is not the supply of motor vehicle as they do not own the chassis. The applicant submitted that there is no transfer of ownership for providing such services and thus it appears supply of service.
- The activity of bus body building, on the chassis provided by the sender by using their own inputs and capital goods, merits classification as Supply of Services under SAC 998882 and also under the job work provisions read with Para 3 of Schedule II of CGST Act, which attracts GST @ 18%.
Gujarat AAR: Ruling
The two-member bench of Sanjay Saxena and Mohit Agarwal held that on fabrication of bus body on the chassis supplied by the owner of chasis i.e. Principal on delivery challan, on which body is fabricated on chasis by collecting job work charges including inputs required for such fabrication work and in no case the ownership of the chassis is transferred by principal to the applicant merits classification under SAC 998881 – “Motor vehicle and trailer manufacturing services” and under Entry No. 26(ii) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 as “Manufacturing services on physical inputs (goods) owned by other” and it is taxable @ 18% [9% under CGST and 9% under SGST Act].
However if the the applicant builds body on the chassis owned by him and supplies the complete built-up vehicle, and charges the customer for the value of motor vehicle, then the activity amounts to Supply of vehicle and attracts 28% GST. Hence, supply of complete body built motor vehicle merits classification HSN 8707 and it is taxable @28%.
The AAR further said that the repairing work carried out by the applicant on damaged vehicles supplied by the owner will be classify as service and will be composite supply as such applicant is doing repairing work and also using material for repairing as required. Such repairing service is classifiable under SAC 9987 and GST is leviable @ 18 % { 9% CGST +9% SGST} in terms of Sr. No. 25 of Not. No. 11/2017-CT (Rate) dated 28.06.2017.
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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.
