The manufacturing job work of chocolates is liable to 5% Goods and Service Tax (GST), according to a decision by the Telangana Authority for Advance Ruling. The applicant, M/s Gandour India Food Processing Pvt. Ltd., is a major player among Rangareddy, Hyderabad’s chocolate manufacturers. It is renowned for offering services in the following industries: sugar-coated chocolate manufacturers, confectionery manufacturers, and food product retailers.
They are “job work providers” carrying out the task of making chocolates given by the “job work receivers”. Their offering falls under SAC Code 9988 and is subject to a 5% tax.
The applicant requested an early decision on the GST tax rate on the service of job work providers for manufacturing chocolates in addition to making clear the Scheme of Classification of Services.
The applicant argued that according to the notification 31/2017, dt 13-10-2017, serial number 26, Heading 9988 clause (f) “all food and food products falling under Chapter 1 to 22 in the first schedule to the Customs Tariff Act, 1975 (51 of 1975)”. Their products were liable to 5% GST as the products came under Chapter 19 of the Customs Tariff Act.
CA M. Ganesh, CA Kishore Kumar, and Finance Executive P Anil Kumar were the attendee of the personal hearing for the petitioner. The applicant stated that they are “job work providers” offering work of manufacturing chocolates following the inputs given by the “job work receiver”. The service falls under SAC Code 9988 at a 5% tax rate.
Moreover, 998816 is the SAC Code that is applicable in their case. However, they could not find a separate tax rate for this 6-digit code. In that way, it can be concluded that the tax rate of SAC Code 9988 at 5% is also liable for the 6-digit.
The applicants stated that they followed the 4-digit code and, based on notification 78/2020, they were required to include a 6-digit SAC on their service bill. However, they faced difficulties in filing a separate tax rate for this 6-digit code within the service code classification.
The authority bench noted that Para 3 of Schedule II of the CGST Act, which points out certain activities to be treated as either a supply of goods or a supply of services, concerning which, any treatment or process applied to another person’s goods is deemed a supply of services. Consequently, the applicant’s supply falls under the category of ‘supply of services’.
Furthermore, the applicant’s job work constitutes a crucial part of the customer’s manufacturing process, thereby falling under SAC 9988.
Read Also: A Complete Guide on Job Work Under GST India
Subsequently, the authority bench, consisting of S.V. Kasi Visweswara Rao, Additional Commissioner of State Tax, and Sahil Inamdar, Additional Commissioner (Central Tax), reviewed the Scheme of Classification of Services. They determined that the service offered by the applicant corresponds to “998816” or “Other food product manufacturing services”. The applicable tax rate for this category is 2.5% CGST and 2.5% SGST.
Based on these considerations, it was concluded that a 5% GST rate applies to the job work involved in manufacturing chocolates.
