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Devyani | Oct 29, 2021 | Views 826238

CED coating Services were in the nature of job work services: AAR

CED coating Services were in the nature of job work services: AAR

Maharashtra AAR ruled that the services supplied by the applicant i.e. CED coating were in the nature of job work services

In re M/S Fine Electro Coating; Maharashtra Authority for Advance ruling; 11.10.2021

The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 by M/s Fine Electro Coating, the applicant, seeking and advance ruling on the issue that whether the activity/process carried out by the applicant on goods received from its clients amounts to jobwork and if yes, whether the provisions of notification no. 20/2019-C.T.(rate) dated 30.09.2019 applicable in this case.

Facts and Contention:

  • The applicant is engaged in rendering premium CED coating and powder coating services. The firm also undertakes metal finishing coating services for various products and further offers (a) CED coating for metallic components & auto parts (b) coating on general industrial equipments etc.
  • Process followed by the company for CED coating and powder coating: CED coating (Cathodic Electro Deposition).
  • Firm receives products (e.g. Auto Parts) from its customers through delivery challan only, here as per requirements of the customer the parts go through the Phospheting Treatment (PT Line) first and then for coating with the use of Powder coating gun Machine (here main raw material consist of Powder which is type of paint only)
  • Though the treatment and processing is commonly understood as services, there is no implication that job work is purely services or that goods would not be used for such treatment or processing. However, Schedule II-Point no.3 of the CGST Act, 2017 specified activities to be treated as supply of goods or services inter alia provides that any treatment or process which is applied to another person’s goods is supply of services. Such a deeming fiction in respect of job work is given effect to, further law requires that treatment or process undertaken by the job worker must be on goods belonging to another registered person.
  • It may safely be understood that, if one unit of the company supplies goods for further processing to another unit of the same company, having different registration from that of the supplying unit, the unit undertaking the processing activity can be treated as a job worker.
  • Here the firm is involved in the processing or treatment such as CED/Powder coating on goods belongs to others classifiable as job worker.
  • Hence service of job worker is classifiable under chapter heading 9988 Manufacturing services on physical inputs (goods) owned by others –original SAC code used by the firm is 990098.
  • Further as per recent notification issued by the Ministry of Finance-notification no. 20/2019 along with press release, GST rate on job work services has been reduced 12% from 18% such as supply of machine job work in engineering industry except supply of job work in relation to bus body building which would remain at 18%.

Discussion and Finding:

  • From the submissions of the applicant, the following findings could be concluded:

i. The process is undertaken by a person i.e., the applicant;
ii. The process is undertaken on goods belonging to another person who is registered under the GST Act;
iii. Only job charges in the form of processing charges, are received by the applicant.
iv. The goods after processing are returned back within one year.
v. No new product emerges after the process is carried out by the applicant on the goods which belong to GPL.
vi. The applicant receives only job charges after the process is carried out by the applicant on the goods which belong to GPL.
vii. The applicant receives only job charges from GPL for the services rendered.

  • It was observed that since no new product comes into existence after the process conducted by the applicant on the goods supplied by its principals, therefore, the process undertaken will come under the purview of job work as defined under section 2(68) of the GST Act, 2017. Thus in view of the aforesaid, it was held that the applicant is only a job worker and as a job worker, carries out process on goods supplied by its principals.
  • The subject supply of services do not fall under entries at items (i), (ia), (ib) and (ic) of the notification no. 11/2017-Central Tax Rate dated 28.06.2017 as it existed prior to 01.10.2019.
  • The Hon’ble Supreme Court in the case of Maruti Suzuki Ltd. vs CCE, New Delhi, 2015 (318) E.L.T 353 (S.C.)(Attachment-2)has also held that there is a distinction between processing and manufacture and that Electro Deposition (ED) Coating of anti-rust treatment to increase shell life of various component is merely a processing activity and not a complete manufacturing activity. On the basis of the aforesaid case law, it was held that activity of coating is only a process undertaken on goods. Therefore the activity undertaken by the applicant is covered under the definition of Job Work.


  • The impugned services supplied by the applicant were in the nature of job work services, covered under entry at item (id) under reading 9988 of notification no. 11/2017-Central tax Rate dated 28.06.2017 as amended.
  • And in view of the same, the Notification no. 20/2019 Central Tax (Rate) New Delhi, 30.09.2019 where GST rate on job work is reduced to 6% from 9% is applicable to the firm.

To Read Official Judgment Download PDF Given Below: 

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