The Gujarat Authority for Advance Ruling ( AAR ) held that the activity of insulating bare M.S. Pipes on a job work basis using PU Foam and PE Film/HDPE jackets attracts 18 % Goods and Service Tax ( GST ). The authority held that the activity of insulating bare M.S. Pipes provided by the registered customers on a work basis using PU Foam and PE Film/HDPE jackets would be classifiable under Sr. No. 26 of notification No. 11/2017-CT (Rate) dated 28.6.2017.
M/S Perma Pipe India Private Limited is engaged in the activity of adding insulation to bare M.S. pipes to convert them into pre-insulated M.S. Pipes. The applicant is adding PU Foam and PE film/HDPE jackets on the bare M.S. pipes provided by their customers (ie other registered owners). The procedure adopted by the applicant for adding insulation to bare M.S. pipes, to convert them into pre-insulated M.S. pipes, is as under viz they purchase chemicals viz Polyol, Isocyanate etc. for preparation of PU foam; they purchase of HDPE granules required for preparation of jackets; and they purchase of PE films required for winding PU foam.
The applicant has further stated that they receive bare M.S. pipes on a work basis under delivery challan and after carrying out the necessary process of adding PU Foam and PE film/HDPE jacket, they send back the pre-insulated M.S. pipes to customers in terms of section 143 of the Act.
It was claimed by the applicant that the process undertaken by them satisfies the test laid down by the Supreme Court’s judgement & thus amounts to manufacture to fall within the ambit of heading 9988. However, it is the applicant’s case that the PU foam as well as PE film/HDPE jacket which render essential characteristics of an insulated pipe are owned by the applicant & since these constitute a bulk of essential ingredients in insulated pipes, they fall outside the ambit of heading 9988 which according to the applicant mandates that the manufacturing service must be performed on physical inputs owned by others.
The applicant stated that since the services provided by them amount to manufacture but are not covered by Sr. No. 26 [heading 9988] of the notification ibid, the same is covered under Sr. No. 27 [heading 9989] and is chargeable to GST @ 18%.
It was observed that “for services by way of treatment of processing undertaken by the applicant on physical inputs which are owned by persons other than those registered under the CGST Act, would be classified under 26(iv) of notification no. 1 1/2017-CT(Rate), ibid, under the heading 9988.”
The AAR comprising Milind Kavatkar and Amit Kumar Mishra held that activity of insulating bare M.S. Pipes provided by the registered customers on a work basis by using PU Foam and PE Film/I-IDPE jackets owned by the applicant would be classifiable under clause (id) of Sr. No. 26 of notification No. 11/2017-CT (Rate) dated 28.6.2017. Further, it would be classifiable under clause (iv) of Sr. No. 26 of notification No. 11/2017-CT (Rate) dated 28.6.2017 in respect of similar service provided on goods belonging to unregistered persons.
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