The West Bengal Authority for Advance Ruling (AAR) has held that the job work retaining gold on account of wastage beyond the permissible limit would be liable to 5% of Goods and Service Tax.
Aabhushan Jewellers Pvt. Ltd is a job worker who receive order for manufacture of gold ornaments from a registered person in the state of West Bengal (the principal)
The business mode of applicant was like 1000 grams of pure gold provided by the principal for manufacturing of gold ornaments and the applicant would be allowed a provision for wastage of 40 gms means the applicant had to return gold ornaments weighing 960 gms to the principal. The consideration for providing this manufacturing service would be Rs.50,000/ – on which GST would be levied at 5%.
The applicant, thereafter, would sub-contract the order to another job-worker on agreed provision of allowing wastage of 30 gms and the applicant would stand to gain 10 gms of pure gold in addition to the making charges for manufacturing of gold ornaments. The applicant has sought advance ruling as to whether the assessee would be liable to pay GST in respect of gain of 10 grams of Pure Gold.
Yash Baid, who appeared for the applicant, submitted that allowing such provision for wastage or normal loss was an industry-wide practice. He also submitted that ultimately leaving 10 grams of pure gold was not a consideration for supply of services but self-generated based on applicant’s experience, internal efficiency and bargaining power and would not be liable to GST.
The Authority for Advance Ruling of Brajesh Kumar Singh (Joint Commissioner-CGST) and Joyjit Banik, (Senior Joint Commissioner-SGST) observed that the activities carried out by the applicant would come within the purview of job work as defined in the GST Act.
It was also observed that and the excess wastage allowed to the applicant would be considered as non-monetary consideration for determination of value of supply of job work services as the price was not the sole consideration for the supply. Therefore, the value of supply of services, making charges on which the applicant is liable to pay tax @ 5% would be determined as per provision of section 15 of the GST Act read with rule 27 of the CGST/ WBGST Rules, 2017. The Bench held that the applicant who retained 10 gm of pure gold on account of wastage which was beyond the permissible limit of wastage in the nature of normal loss, the value of pure gold so retained by the applicant would form a part of value of supply of job work services and would be liable to 5% of GST.
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