In Re: Prodair Air Products India (P.) Ltd.,
GST
2018 (11) TMI 59 – AUTHORITY FOR ADVANCE RULINGS, KERALA – 2018 (18) G. S. T. L. 817 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULINGS, KERALA – AAR
Dated:- 20-10-2018
AAR No. KER/22/2018
GST
B.G. KRISHNAN AND B.S. THYAGARAJABABU, MEMBER
Authorized Representative: Adv. Nitin Vijaiveergia and Paresh Sancheti for the Applicant.
The applicant is a manufacturer of industrial gases such as Hydrogen, Nitrogen, Oxygen etc. The applicant set up an industrial gases plant adjacent to Bharath Petroleum Corporation Ltd, who is the sole customer. The plant is owned and operated by the applicant on the land owned by BPCL on lease rent basis. The applicant manufactures Industrial Gases using various inputs such as natural gas, de-mineralized water, raw water etc supplied by the customer BPCL. Certain quantum of natural gas provided by the customer is supplied to the gas turbines for generation of electricity which is used to power
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b work, what would be the tax rate for supply of job work services?
iii) In case the proposed activity is considered as job work, what is the value on which the applicant would be liable to pay GST?
The authorized representative of the applicant was heard. It is stated that the customer BPCL would commence the movement of natural gases and other inputs through pipeline on the basis of job work delivery challan under Rule 55(b) of GST Rules to the applicant's plant on free of cost basis. On receipt of the said inputs, the applicant would be converting these inputs to industrial gases such as Hydrogen, Nitrogen, Oxygen etc. The industrial gases would be sent back to BPCL plant on the basis of the Job work delivery challan under Rule 55(b) of GST Rules. Applicant would be issuing monthly tax invoice charging the conversion charges for processing / conversion of inputs to industrial gases along with applicable GST.
The applicant would be recovering the job work charges for processing
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establish a transaction as job work is the treatment or process undertaken on the goods belonging to another. Section 143 of GST Law explain the procedure to be followed in the case of job work transaction. A registered taxable person may, under intimation, send any inputs without payment of tax to a job worker for job-work and bring back inputs after completion of job work or otherwise, within one year of their being sent out, to any of the place of business without payment of tax. The word input defines as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.
The applicant being a job worker satisfy the necessary ingredients to carry out job work activity. The treatment or process undertaken by the applicant on the goods belong to the principal ie, BPCL. The goods on which treatment or process apply are the inputs of the principal. The principal transfer the inputs meant for job work on free of cost under intimation t
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ture, and just because activities undertaken result in a new commodity, it cannot be said that there was no job work involved. In the case of JSW Energy Ltd, Maharashtra Appellate Authority for Advance Ruling observed that job work may include 'manufacture' or bringing into existence a new distinct product. Hence the definition of job work under the GST Act is much wider compared to the pre-GST regime.
Therefore any activity whether amounting to manufacture or not, could qualify as job work activity, subject to the condition that the inputs owned by the principal and the job worker carried treatment or process on the inputs/goods. The value on which GST would be payable by the applicant for rendering of job work services shall be the transaction value ie, price actually paid or payable as per the commercial arrangement between the applicant and principal. No other cost shall be required to be considered for the valuation of the job work activity unless the same is specifically include
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ed with the principal. These inputs and out puts are used in the course or furtherance of business of manufacture of petroleum products. Under GST regime 'inputs' have wider meaning, as such the goods sent by the principal such as natural gas, de-mineralized water raw water etc should fall under the definition of inputs as the same being indirectly used for ultimate manufacturing of petroleum products. Further, the industrial gas received by the principal shall also fall under the definition of inputs as the same are being used for manufacturing of final petroleum products. Therefore the scope of the term 'in the course or furtherance of business' under GST Law is wide enough to include all those goods which are used directly or indirectly for the conduct of business.
These inputs subject to particular process by the job worker and converted in to industrial gas and returned to the principal. It is settled position of law that job work is an activity which may or may not tantamount to
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