GST rate change on job-work services

by | Oct 17, 2019

With effect from October 1, 2019, the rate of GST on job-work services have been amended vide Notification No.20/2019-Central Tax (Rate) dated September 30, 2019 (‘Amendment Notification’). Through this update, we would like to apprise you the implications of this Amendment Notification.


After the last GST Council meeting, the Press Release dated September 20, 2019 mentioned that machine job-work (other than bus body building) will attract GST of 12 percent. There was an ambiguity on coverage of the expression ‘machine job-work’.


The Amendment Notification seems to have removed the ambiguity and has clarified that all job-work will attract GST of 12 percent other than the following:


  • Bus-body building
  • Printing of newspapers, books, journals etc.
  • Job-work on textile products
  • Tailoring services
  • Manufacture of umbrella
  • Manufacture of handicraft goods
  • Job-work on precious stones
  • Manufacture of leather goods or footwear
  • Manufacture of food and food products
  • Manufacture of clay bricks


Here, it is important to note that the Amendment Notification has kept clause (iv) of S. No. 26 of Notification No. 11/2017-Central Tax (Rate), dated June 28, 2017 (‘Service Rate Notification’) intact. The said clause covers manufacturing services on physical inputs (goods) owned by others (other than mentioned above) and attracts GST of 18 percent.


The definition of ‘job work’ under Section 2(68) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) covers treatment or process on other person’s goods and does not include or exclude manufacture. Moreover, ‘manufacture’ is defined, under Section 2(72) of the CGST Act, as processing of raw materials or inputs in any manner that results in emergence of new products having a distinct name, character and use.


In our view, the activity of manufacture also qualify as job work as the same involves treatment or process undertaken on other person’s goods. Hence, all job-work (except specified activities) will attract GST of 12 percent and S.No.26(iv) which is a residuary entry will not be relevant for such activities.


Here, it is important to note that the Authority for Advance Ruling (‘AAR’) in the case of JSW Energy Limited 2018-VIL-15-AAR (MAH) (affirmed vide 2018-VIL-01-AAAR), observed that the legislature has defined job-work and manufacture separately. Basis above, the legislature does not intend to cover a treatment or process resulting into a distinct commodity under the scope of job work. Basis this, the department may contend that the residuary entry should not become redundant, and the same will apply in case a new commodity comes into existence. Hence, the department may contend that the taxpayers should pay GST of 18 percent in such cases. In our view, such a contention is refutable for the reasons given above.


NITYA Comments: All job-work activities (whether resulting in manufacture or not) attract GST of 12 percent. However, if levy of higher GST rate is revenue neutral for supplier and recipient, taxpayers undertaking manufacturing activity (where a new commodity comes into existence) can opt to pay GST of 18 percent to avoid any dispute in future.