Fact: M/s Synthite Industries Limited (“the applicant”) is engaged in Job work of removing “Caffeine” from Tea powder imported from foreign Company. A foreign Company (“the Principal”) had entered into an agreement with the applicant-job worker on 20.07.2017 for undertaking the work of processing Tea i.e., super critical fluid extraction, the other way round called removing Caffeine from Tea, the raw material/packing material is supplied by the foreign Principal to the factory premises of the applicant-job worker, and after the process, the de-caffeinated tea will be exported to the Principal as per the instructions entered at the time of agreement.
Issue Involved: The following questions have been posted before the Authority as follows:
- Whether the process of providing job work service to foreign customer as explained above is taxable under GST. Is such transaction attracts GST?
- If applicable to GST, whether they have to pay IGST or SGST+CGST?
- Is the job work service provided by them is exempted from service tax under Mega exemption list as per Notification No. 25/2012 dated 20.06.2012 and not chargeable to GST?
Held: The Hon’ble AAR of Andhra Pradesh vide Advance Ruling No. AAR/AP/08(GST)/2018 dated August 20, 2018 stated as follows:
- The process of providing job work service by the applicant to the foreign principal, shall be classified under the HSN Code services Heading 9988. Further, the process providing job work service to the foreign principal, in the premises of the applicant as per the specifications of the recipient of services, is taxable under APGST Act 2017/CGST Act 2017, as per Entry No.26 (HSN Code 9988) Proviso (iv), and liable to tax @ 18%.
- The raw material and work material for the said job work are supplied by the foreign principal, and the applicant is undergoing processing of the product as per the specifications of the principal, and the final product is being exported as per the terms and conditions to the principal. This transaction is squarely falling under clause (a) of Sub Sec 3 to Sec 13 of IGST Act 2017, therefore, the place of supply for this transaction is location of the service where actually performed i.e., business premises of the applicant which is located in the State of Andhra Pradesh. Hence the tax liability under SGST Act/CGST Act 2017 only applies.
- Regarding applicability of Notification No.25/2012, dated June 20, 2012, as the Service Tax Act itself subsumed under Goods & Services Tax Act 2017, the Notification referred to, is no more applicable.