GST Advance Ruling on Job Work for Industrial Gas Suppliers
The Gujarat Authority for Advance Ruling confirmed that manufacturing industrial gases using a client's inputs qualifies as job work for GST purposes.
- Ruling
- GUJ/GAAR/R/2018/7 dated 21.03.2018
- Dated
- 21 Mar 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
- Inox Air Products asked if their gas manufacturing process qualifies as job work.
- The Authority ruled the activity is job work under Section 2(68).
- GST is payable only on the job work charges, not the full gas value.
In short
The company asked if their arrangement of using a client's land and utilities to produce industrial gases counts as job work under the Goods and Services Tax (GST) law. They also wanted to know if they should pay tax on the total value of the gas or just their service fee.
What has changed
How it worked before
It was unclear whether captive manufacturing arrangements where the principal provides essential utilities and land would be classified as job work or a standard supply of goods.
What has changed
The Authority decided that this process is job work because the company is performing a service on goods belonging to another registered person. This means the company only pays GST on the service fee (job work charges) rather than the full market value of the gases produced.
Who this affects
Industrial gas suppliers or manufacturers who operate plants on a client's premises using the client's utilities.
An example
Imagine a chemical manufacturer, ABC Chemicals, who sets up a plant inside a client's factory to process raw materials provided by that client. ABC Chemicals charges a monthly fee for this service. Based on this ruling, ABC Chemicals would likely only pay GST on their monthly service fee, rather than the total value of the chemicals produced.
What you should do
If you have a similar arrangement, you can use this ruling as a reference for how the tax department views these contracts. However, remember that an advance ruling only legally binds the company that asked for it and their specific tax officer; it is not a universal law for all businesses.
If you do nothing
If you assume this ruling automatically applies to your business, you risk underpaying your GST liability if your specific contract terms differ. A tax officer may disagree with your classification during an audit, leading to demands for unpaid tax, interest, and potential penalties.
The terms explained
- Job Work
- Any treatment or process undertaken by a person on goods belonging to another registered person.
- Transaction Value
- The actual price paid or payable for the supply of goods or services between unrelated parties.
- Captive Consumption
- When a manufacturer uses the goods they produce for their own further production process rather than selling them to the open market.
The ruling in detail
Authority for Advance Ruling
M/s. Inox Air Products Pvt. Ltd.
GUJ/GAAR/R/2018/7 dated 21.03.2018 · Gujarat
Questions before the authority
- Whether the activity undertaken by the applicant amounts to “Job Work” as defined under Section 2(68) of the Central Goods and Services Tax Act, 2017?
- What is the value on which the applicant is liable to pay GST?
Facts
The applicant operates an air separation plant on land provided by M/s. Essar Steel India Limited to manufacture industrial gases (Oxygen, Nitrogen, and Argon). M/s. Essar provides electricity, industrial water, and the designated land free of cost, and the resulting gases are captively consumed by M/s. Essar. The applicant sought a ruling on whether this arrangement constitutes job work and the appropriate valuation for GST purposes.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification of activity as Job Work | Yes, the activity falls under the definition of Job Work Based on the processing of goods belonging to another registered person |
| Valuation for GST | Transaction value under Section 15(1) The value is the price actually paid or payable as Job Charges |
The Authority ruled that the applicant's activity of manufacturing industrial gases from inputs provided by the principal qualifies as **Job Work** under the GST Acts. Consequently, the applicant is liable to pay GST on the **transaction value** of the supply, which is the job work charges paid by the principal.
Reasoning
The Authority determined that the inputs (electricity, water, and atmospheric air) qualify as goods and that the applicant is performing a process on goods belonging to another registered person, satisfying the definition of **Job Work** under Section 2(68). It rejected the argument that the transaction required valuation under Chapter IV of the CGST Rules, finding that the applicant and M/s. Essar are not related persons. Therefore, the **transaction value** under Section 15(1) of the CGST Act, 2017, which is the job work charges, is the correct basis for tax liability.
Provisions relied on
- Section 2(68) of the CGST Act, 2017
- Section 2(52) of the CGST Act, 2017
- Section 15(1) of the CGST Act, 2017
- Section 15(4) of the CGST Act, 2017
- Section 7(1)(d) of the CGST Act, 2017
- Entry 3 of Schedule II of the CGST Act, 2017
For the practitioner
This ruling confirms that captive manufacturing arrangements where the principal provides essential inputs and land can qualify as **Job Work** under GST. It provides clarity for industrial gas suppliers operating within a principal's premises that they may charge GST only on the **job work charges** rather than the full value of the goods, provided the parties are not related.
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/guj-2018-7_dt_21-03-18_inox_air_products.pdf
Legibility of the scan, as read: high.
Prepared 16-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.