AAR Classifies Fish Processing as 'Job Work', Attracting 5% GST Rate [Read Order]

In a significant clarification on the tax treatment of seafood handling, the Tamil Nadu Authority for Advance Ruling (AAR) has delineated that comprehensive fish processing activities undertaken on goods owned by another entity qualify as 'job work' for the purposes of the Goods and Services Tax (GST). The ruling definitively states that such services will attract a consolidated GST rate of 5 percent, applicable from October 13, 2017. This decision provides much-needed clarity for a niche segment of the food processing industry, outlining the specific conditions under which this tax rate applies and cementing the classification of these activities under the service tax umbrella.

The ruling was sought by Jude Foods India Private Limited, a company engaged in the direct sale of fresh and frozen fish, which also offers fish processing services to other businesses. The company's process involves receiving raw fish or prawns supplied by its clients, followed by a series of steps including cleaning, cutting, filleting, or peeling. The processed seafood is then frozen, packed, labelled, and stored in cold storage at temperatures of minus 18 degrees Celsius or lower, before being shipped back to the service receiver in specialized reefer containers. The applicant had contended that this entire service should be classified under the service heading 998812, attracting a 5 percent GST rate.

The AAR conducted a detailed analysis to arrive at its conclusion. The authority emphasized that for an activity to be considered 'job work', it must meet three essential criteria: the activity must constitute a 'treatment or process' on 'goods', and those goods must belong to another registered person under the GST regime. The bench found that the meticulous process undertaken by Jude Foods—transforming raw, perishable fish into frozen, ready-to-cook products with a significantly extended shelf-life—clearly falls within the definition of a treatment or process performed on physical inputs owned by others.

The ruling clarifies that fish processing services are correctly classified under heading 998812, which pertains to "Manufacturing services on physical inputs (goods) owned by others." This classification falls under the broader entry for "Services by way of job work in relation to all food and food products falling under Chapter 1 to 22" of the Customs Tariff Act. The AAR specifically referenced the relevant tax notifications that initially introduced and later amended this rate, cementing the 5 percent GST levy (2.5 percent CGST and 2.5 percent SGST). However, the ruling also carries a crucial caveat: this tax rate is contingent upon both the job worker and the principal (the client who owns the fish) strictly adhering to all the procedures and provisions laid out in the GST laws and rules concerning job work transactions.

The bench, led by members Balakrishna. S and B. Sussel Kumar, concluded that the specific tax demands previously raised against the company on the GST portal were unrelated to the core question of service classification and, therefore, did not influence their ruling on the matter. This focused approach ensures the advance ruling is based solely on the nature of the activity presented.

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