Value of supply— Section 15 of CGST Act— In the instant case, the applicant submits that as a job worker he expects to receive an order for manufacture of gold ornaments from a registered person in the state of West Bengal (the principal). 

The applicant has made this application and raised following question—

(1) Whether the gain of the assessee of 10 grams of pure gold would result in supply of goods or services under section 7 of the CGST/WBGST Act, 2017?

(2) Whether the assessee is liable to pay GST in respect of gain of 10 grams of Pure Gold?

(3) In case the assessee is liable to pay GST then what shall be the time and value of Supply?

(4) In case the assessee is liable to pay GST then whether it shall be classified as goods and chargeable to tax @ 3% under HSN: 7108/7113 or whether it shall be classified as service and chargeable to tax @ 5% under SAC: 9988?

The core issue which arises for our consideration is to determine taxability of 10 grams of pure gold, retained by the applicant, in the course of manufacture of gold jewellery from 1000 gm of pure gold provided to the applicant by his principal. The contention of the applicant in this regard is that the provision for allowing such wastage is in the nature of normal loss that occurs during the course of manufacturing and it is an industry-wide practice to allow such provision for wastage or normal loss.

In the instant case, the applicant agrees to provide job work services for manufacturing of gold ornaments to his principal against consideration which is in money. At the same time, the applicant has been allowed wastage by his principal on account of manufacturing loss which exceeds the wastage norm limit that enables the applicant to retain certain amount of pure gold. The process of making gold jewellery involves melting, cutting, moulding, polishing etc. which may result in some amount waste of gold.

Held that— In the instant case, the value of 10 gm of gold shall be a part of value of job work services and accordingly would be taxable @ 5%.

In the instant case, value of the supply shall be determined under rule 27 of the CGST/WBGST Rules, 2017 and time of supply would be determined under sub-section (2) of section 13 of the GST Act.

In the instant case, the value of 10 gm of gold shall be a part of value of job work services and accordingly would be taxable @ 5%.