Telangana Authority for Advance Ruling ruled that five per cent Goods and Service Tax (GST) is applicable on job work of manufacturing chocolates.
The applicant M/s Gandour India Food Processing Pvt Ltd is a top player in the category of Chocolate Manufacturers in Rangareddy, Hyderabad. It is known to provide top service in the following categories: Chocolate Manufacturers, Confectionery Manufacturers, Food Product Retailers and Sugar Coated Chocolate Manufacturers.
They are “Job Work providers” doing job work of manufacturing chocolates with inputs provided by the “job work receiver”. Their service comes under SAC Code 9988 with an applicable tax rate of 5%.
The applicant sought an advance ruling on the GST tax rate on the Service of job work providers for manufacturing chocolates along with clarifying the Scheme of Classification of Services.
The applicant contended that As per rate notification 31/2017, dt. 13-10-2017, serial number 26, Heading 9988 clause (f) “all food and food products falling under Chapter 1 to 22 in the first schedule to the Customs Tariff Act, 1975 (51 of 1975)”. Their products fell under Chapter 19 of the Customs Tariff Act and accordingly, the tax was paid at 5%.
M. Ganesh, CA, Kishore Kumar, CA and P Anil Kumar, Finance Executive attended the personal hearing for the applicant and stated that they are “Job work providers” doing job work of manufacturing chocolates with inputs provided by the “job work receiver”. Their service is coming under SAC Code 9988 with an applicable tax rate of 5%.
Further, the SAC code applicable to them is 998816. But they could not find a separate tax rate for this 6-digit code thereby concluding that the tax rate of SAC code 9988 at 5% applied for the six digits as well.
Applicants also submitted that they were following the 4-digit code and as of the notification 78/2020, they were required to mention 6-digit SAC on their service invoices. But they could not file a separate tax rate for this 6-digit code in the service code classification.
The authority bench observed that “Para 3 of the Schedule II of the CGST Act, specifies certain activities to be treated as supply of goods or supply of services, in accordance with which “Any treatment or process which is applied to another person’s goods is a supply of services”. Therefore, the supply of the applicant is that of ‘supply of Service”.
Also, the job work done by the applicant is a portion of the manufacturing process of the customer of the applicant and therefore, the activity of the applicant is covered under SAC 9988.
Thereafter the authority bench of S.V. Kasi Visweswara Rao, Additional Commissioner of State Tax and Sahil Inamdar, Additional Commissioner (Central Tax) after verifying the Scheme of Classification of Services observed that the service offered by an applicant is “998816” i.e., “Other food product manufacturing services” and the rate of tax as seen from the above entry is 2.5 % CGST and 2.5% SGST.
Thus, it was ruled that 5% GST is applicable to the job work of manufacturing chocolates.
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