GST Advance Ruling on Reclaimed Sand as Supply of Goods
The Maharashtra Authority for Advance Ruling decided that processing waste sand into a new product is a supply of goods, not job work.
- Ruling
- GST-ARA- 55/2019-20/B-47, Mumbai, dated 26.08.2020
- 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
- Processing waste sand into reclaimed sand is a supply of goods.
- The activity is not job work because the product is not returned.
- The value of input waste sand impacts the final product's valuation.
- The process qualifies as manufacturing under the CGST Act.
In short
The Kolhapur Foundry and Engineering Cluster asked if turning waste sand into usable sand counts as job work or a supply of goods. They also asked how to value the final product if the raw waste sand has no cost. The authority decided this is a supply of goods because the company creates a new, sellable product rather than just performing a service for a client.
What has changed
How it worked before
Businesses often assumed that processing waste materials for a client might qualify as job work, which carries different tax implications than selling a manufactured good.
What has changed
The authority clarified that if you transform waste into a new product and sell it, you are a manufacturer, not a job worker. This means you must treat the transaction as a sale of goods and include all costs, including the value of the input, when determining the taxable price.
Who this affects
Foundries, recycling plants, and businesses that process waste materials into new products for sale.
An example
Imagine a plastic recycling firm that collects scrap from various factories to create plastic pellets. They might wonder if they are just providing a service to those factories. Based on this ruling, they are likely making a supply of goods because they create a new product and do not return the original scrap to the suppliers.
What you should do
If your business model involves transforming waste into new goods, you should classify your sales as a supply of goods. Remember that an Advance Ruling only binds the business that asked for it and their specific tax office; it is not a universal law for all businesses.
If you do nothing
If you incorrectly classify a supply of goods as job work, you may underpay your GST or use the wrong tax codes. A tax officer could later demand the difference in tax, plus interest and penalties, if they decide your activity is actually manufacturing.
The terms explained
- Job work
- Any treatment or process undertaken by a person on goods belonging to another registered person.
- Supply of goods
- The sale or transfer of ownership of items, which is subject to GST based on the transaction value.
- Manufacture
- The process of bringing into existence a new product with a different name, character, or use.
The ruling in detail
Authority for Advance Ruling
Kolhapur Foundry and Engineering Cluster
GST-ARA- 55/2019-20/B-47, Mumbai, dated 26.08.2020 · Maharashtra
Questions before the authority
- Whether the activity of Applicant is Supply of Goods or Supply of Job Work Services?
- The used waste sand which is of the value 'Nil' (Refer separate Valuation Certificate by Engineer) will have any impact on valuation?
Facts
The applicant operates a sand reclamation plant that processes waste sand received from various foundry units. The applicant claims the waste sand has no commercial value and is processed through heat treatment and other procedures to produce reclaimed sand, which is then sold. The applicant sought a ruling on whether this activity constitutes job work or a supply of goods, and how the 'Nil' value of the input waste sand affects the valuation of the final product.
Ruling
| Question | What the authority ruled |
|---|---|
| Nature of activity | Supply of Goods The activity does not satisfy the criteria for job work under the GST Act. |
| Impact of 'Nil' value of input on valuation | Answered in the affirmative The value of input waste sand has a bearing on the valuation of the outward supply. |
The authority ruled that the applicant's activity constitutes a **supply of goods** rather than job work services. Regarding the second question, the authority held that the 'Nil' value of the input waste sand does have an impact on the valuation of the final product.
Reasoning
The authority determined that the applicant is not a job worker because the input waste sand is not returned to the original supplier, and the final product is a distinct commodity with commercial value. The process involves the applicant's own consumables and labor, making it a **manufacturing process** resulting in a new product. Consequently, the activity falls under the definition of 'manufacture' and 'goods' under Section 2(52) and Section 2(72) of the CGST Act. The authority reasoned that the value of the input, even if initially considered 'Nil', is a factor in the overall valuation of the final supply.
Provisions relied on
- Section 2(52) of the CGST Act
- Section 2(72) of the CGST Act
- Section 2(68) of the CGST Act
- Section 15(4) of the CGST Act
- Section 97 of the CGST Act
- Section 98 of the CGST Act
- Rule 27 of CGST Rules
- Rule 28 of CGST Rules
- Rule 30 of CGST Rules
- Rule 31 of CGST Rules
- Rule 45 of CGST Rules
- Rule 55 of CGST Rules
For the practitioner
This ruling clarifies that processing waste materials into a new, commercially viable product is a **supply of goods** and not job work, especially when the input is not returned to the original supplier. Practitioners should note that the 'Nil' value of waste inputs does not exempt the final product from valuation requirements under the CGST Act. It does not, however, provide a specific HSN classification for the reclaimed sand, as the authority focused on the nature of the transaction.
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/mah_aar_55_2019-20_b-47_26.08.2020_kfec.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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.