5% GST Applicable On Value Of Part Of Gold Retained For Job Work: West Bengal AAR
The West Bengal Advance Ruling Authority (AAR) has ruled that the value of 10 grams of gold is included in the value of job work services and is subject to 5% GST.The bench of Brajesh Kumar Singh and Joyjit Banik has observed that the applicant retains 10 gm of pure gold on account of wastage, which is beyond the permissible limit of wastage in the nature of normal loss. The value of pure...
The West Bengal Advance Ruling Authority (AAR) has ruled that the value of 10 grams of gold is included in the value of job work services and is subject to 5% GST.
The bench of Brajesh Kumar Singh and Joyjit Banik has observed that the applicant retains 10 gm of pure gold on account of wastage, which is beyond the permissible limit of wastage in the nature of normal loss. The value of pure gold retained by the applicant will be included in the cost of providing job work services.
The applicant submitted that, as a job worker, he expects to receive an order for the manufacture of gold ornaments from a registered person in the state of West Bengal. The applicant will be provided with 1000 grams of pure gold by the principal for the manufacturing of gold ornaments. The applicant will be allowed a provision for wastage of 40 gms by the principal, i.e., the applicant has to return gold ornaments weighing 960 gms to the principal. The applicant would subcontract the order to another worker with the agreed-upon provision of allowing for 30 g wastage. The applicant, thus, would stand to gain 10 gms of pure gold in addition to the charges for manufacturing gold ornaments.
The applicant sought an advance ruling on the issue of whether the gain of the assessee of 10 grams of pure gold would result in the supply of goods or services under Section 7 of the CGST/WBGST Act, 2017. Whether the assessee is liable to pay GST in respect of the gain of 10 grams of pure gold What is the time and value of supply if the assessee is required to pay GST?
The applicant contended that the consideration for providing the manufacturing services is the making charge of the gold ornaments, whereas the provision for the wastage of 40 grams of pure gold is to meet the normal loss that would occur during the course of manufacture. These terms of consideration and provision for waste would be expressly accepted by the applicant and the principal in the work order. It is thus imperative to distinguish the provision for wastage from consideration for the supply of services.
The applicant stated that the 10 grams of pure gold that are left with the applicant cannot be termed as consideration. Hence, the applicant is not liable to pay GST on the 10 grams of pure gold.
Applicant’s Name: Aabhushan Jewellers Pvt. Ltd.
Date: 09.02.2023