GST Rate on Vehicle Body Building on Customer Chassis: MP AAR
Building vehicle bodies on customer chassis is a composite supply, with GST determined by whether goods or services predominate in the job.
- Ruling
- 04/2018 dated 30.06.2018
- Dated
- 30 Jun 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Body building on a customer chassis is classified as a composite supply.
- Tax rate depends on whether goods or services form the predominant component.
- Buyer intention does not decide GST classification for composite supplies.
- Detailed cost breakdowns are required to get a specific GST rate ruling.
In short
Arpijay Fabricators Pvt. Ltd. built vehicle bodies on chassis provided by customers, using their own materials during fabrication. The company asked the Madhya Pradesh Authority for Advance Ruling (AAR) whether this counts as a supply of goods or a job-work service under Goods and Services Tax (GST), and what tax rate applies. They argued that because the buyer intended to get body-building services, the job should be taxed as a service.
What has changed
How it worked before
Many body builders assumed that fabrication work performed on a client-supplied chassis automatically qualified as a pure job-work service under GST, regardless of how much material the builder added.
What has changed
The authority ruled under Circular No. 34/08/2018-GST that vehicle body building on a client chassis is a composite supply under GST. The applicable tax rate depends on whether the goods component under Chapter 87 or the service component under Heading 9988 predominated in the job, as per Section 8(a). The authority rejected the buyer's intention test, stating only the physical nature of the supply matters. Because the company failed to provide detailed material and cost breakdowns, the authority refused to fix an exact tax rate.
Who this affects
Vehicle body builders, auto fabricators, and engineering firms in India that build bodies, trailers, or structures on chassis supplied by customers.
An example
An engineering firm in Indore receives bus chassis from a fleet owner to construct 20 bus bodies using its own steel, glass, and seats. The firm wants to know whether to charge GST as a service or as a supply of motor vehicle bodies under Chapter 87. Following Order 04/2018, the firm must analyze its cost structure to determine whether materials or labor form the main value of the contract. If materials outweigh labor, it is taxed as goods under Chapter 87; if labor predominates, it is treated as a service under Heading 9988.
What you should do
Review your contracts and maintain detailed cost sheets showing the split between material costs and labor charges for every body-building job. Note that an advance ruling binds only the applicant and their immediate tax office. If you want legal certainty for your own tax calculations, you must apply for your own ruling with complete cost breakdowns.
If you do nothing
If you treat body building on a customer chassis as a service without assessing material costs, a tax officer during an audit may reclassify it as a supply of goods under Chapter 87. This can lead to tax shortfalls, interest charges, and penalties. You cannot defend yourself simply by pointing to another company's advance ruling.
The terms explained
- composite supply
- A single transaction that consists of two or more goods or services naturally bundled and provided together in the ordinary course of business.
- job-work
- Any treatment or process undertaken by a person on goods belonging to another registered business owner.
- predominant component
- The primary or main part of a bundled supply that gives the entire transaction its essential character and determines its tax rate.
The ruling in detail
Authority for Advance Ruling
ARPIJAY FABRICATORS PVT. LTD.
04/2018 dated 30.06.2018 · Madhya Pradesh
Questions before the authority
- Whether the supply made by us is to classified as supply of goods or supply of services?
- What would be the appropriate classification and applicable rate of tax for the above transaction?
Facts
The applicant is engaged in the business of building bodies on vehicle chassis supplied by its principals on a job-work basis, using its own materials during the process. The applicant contended that the activity constitutes a job-work service. It sought an advance ruling to clarify whether the transaction is a supply of goods or supply of services, and the applicable classification and GST rate.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification as goods or services supply | Composite Supply Carried out on chassis supplied by the principal in the capacity of a job worker |
| Classification and rate of tax | Chapter 87 if goods predominate, or Heading 9988 if service predominates Determined by predominant component under Section 8(a); no specific rate fixed due to lack of complete information |
The AAR held that the body building activity carried out on chassis supplied by the principal constitutes a **composite supply**. The tax liability and rate on such composite supply are determined by the **predominant component** under Section 8(a); if goods predominate, it falls under Chapter 87, and if service predominates, it falls under Heading 9988. However, due to incomplete technical details provided by the applicant, no definitive rate of tax was fixed.
Reasoning
Relying on Circular No. 34/08/2018-GST dated 01.03.2018 and Section 2(30) of the CGST Act, 2017, the AAR observed that body building using applicant's materials on a customer's chassis is a composite supply. Under Section 8(a) and Section 2(90), the tax treatment is dictated by the principal supply, which depends on whether the goods or service component predominates. The authority rejected the applicant's argument that the 'predominant intention' of the buyer determines classification, as the statute only looks at the predominant component of the supply. Since the applicant did not provide specific cost/component breakdowns, the authority declined to give a definitive classification or rate.
Provisions relied on
- Section 2(30) of the CGST Act, 2017
- Section 2(90) of the CGST Act, 2017
- Section 8(a) of the CGST Act, 2017
- Section 97(2) of the CGST Act, 2017
- Circular No. 34/08/2018-GST dated 01.03.2018
- Chapter 87 of the Tariff
- Heading 9988
For the practitioner
The ruling confirms that vehicle body building on customer-supplied chassis is a **composite supply** where taxability depends on the predominant component under Section 8(a) (Chapter 87 vs Heading 9988). It explicitly rejects the 'buyer's intention' test for classification and underscores that applicants must present detailed cost and material breakdowns to receive a specific GST rate ruling.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/order_arpijay_fabricators_private_limited.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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