The Kerala Authority for Advance Ruling (KAAR) has held that the activity of bodybuilding of motor vehicles on chassis amounts to the supply of services and attracts 18% GST.
AromalAutocraft, the applicant is engaged in bodybuilding on the chassis given by the customers on a job-work basis. The applicant submitted that customers purchase chassis and hand over them for fabricating the body. The applicants are providing the service of bodybuilding on motor vehicles by fabrication and charging fabrication charges on a lump sum basis.
Providing manufacturing services or bodybuilding services on physical inputs (goods) or chassis owned by others and provided by the owner for bodybuilding and the applicant charges lump-sum fabrication charges (including certain materials that would be consumed during the process of bodybuilding).
The applicant carrying out this activity of manufacturing tippers, tankers, trailers, buses, etc. on chassis provided by the owners of such vehicles. The process of said manufacturing activity is as (i) receiving chassis at a workshop; (ii) purchasing raw steel and receiving it at the works op; (iii) preparing a cutting plan and drawing; (iv) cutting and bending raw material; (v) welding of all cutting and bending part; (vi) assembly of all fabricated parts; (vii) final product of chassis.
The activity of providing service of bodybuilding on motor vehicles/ chassis owned by others by fabrication and collecting lump sum fabrication charges should be treated as a supply of service in terms of paragraph 3 of Schedule Il of. 2017.
It was further submitted that the activity of providing service of bodybuilding on motor vehicles/ chassis owned by others by fabrication and collecting lump sum fabrication charges should be treated as a supply of service in terms of paragraph 3 of Schedule Il of the CGST Act, 2017.
As per Para 3 of Schedule Il of the CGST Act, 2017 which lists out the activities or transactions to be treated as a supply of goods or supply of Services; any treatment or process which is applied to another person’s goods is the supply of service.
The applicant is collecting the charges for the activity which includes the cost of inputs/ material used by the applicant} and the labour charges for the fabrication of the body. It was evident that the applicant is fabricating the body on the chassis belonging to the customer.
The ownership of the chassis remains with the customer and at no stage of the process of fabrication of the body, the title of the chassis is transferred to the applicant. Therefore, the applicant is fabricating the body on the chassis belonging to another person and hence the activity is squarely covered under Para 3 of Schedule Il of the CGST Act, 2017 as a treatment or process which is applied to another person’s goods and accordingly is a supply of services.
The Authority comprising of Dr.S.L. Sreeparvathy, IRS & Shri. Abraham Renn S, IRS held that “the activity of bodybuilding of motor vehicles on the chassis supplied by the customer is a supply of services and is liable to GST at the rate of 18% [9% CGST + 9% SGST] as per entry at Sl. No. 26 (ic) — 9988 — Manufacturing services on physical inputs (goods) owned by others – Services by way of job work in relation to bus body building; of Notification No. 11/2017 Central Tax (Rate) dated 28/06/2017.”
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