GST Classification for Job Work Involving Your Own Materials
The Tamil Nadu Authority for Advance Ruling confirmed that bonding materials to customer-owned parts is a service, not a supply of goods.
- Ruling
- Advance Ruling No.118/AAR/2023 Dated:29.11.2023
- 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
- Oerlikon Friction System asked if bonding carbon strips to metal cores is job work.
- The Authority ruled the activity is a supply of service under SAC 9988.
- Using your own materials during job work does not change the service classification.
In short
The company asked the Tamil Nadu Authority for Advance Ruling (AAR) whether bonding carbon friction strips to customer-provided metal components counts as a service or a sale of goods. Because the core metal parts belong to the customer, the authority decided the entire process is a job work service under SAC 9988, even though the company provided the carbon material.
What has changed
How it worked before
Businesses were often unsure if adding their own materials to a customer's product turned a job work service into a composite supply of goods.
What has changed
The ruling clarifies that applying a process to someone else's goods is always a service under GST law. This means you must charge GST at the service rate for job work, rather than the rate for the finished product.
Who this affects
Manufacturers and workshops that perform value-added processes on components supplied by their customers.
An example
Imagine a workshop that receives steel gears from a client to apply a specialized heat-treatment coating. The workshop uses its own chemical coating material for the process. Based on this ruling, the workshop should classify this as a job work service under SAC 9988, not as a sale of coated gears.
What you should do
Review your current billing practices to ensure you are classifying these processes as services. Remember that an Advance Ruling only binds the company that asked and its specific tax officer; it is not a universal law for your business.
If you do nothing
If you misclassify a service as a supply of goods, you may apply the wrong GST rate. This can lead to tax shortfalls, interest charges, and penalties during a GST audit. Your local tax officer may disagree with your classification if it does not align with the nature of the work performed.
The terms explained
- Job work
- Any treatment or process undertaken by a person on goods belonging to another registered person.
- SAC 9988
- A specific accounting code used under GST to identify manufacturing services performed on physical inputs owned by others.
- Composite supply
- A transaction involving two or more taxable supplies that are naturally bundled and provided together in the ordinary course of business.
The ruling in detail
Authority for Advance Ruling
M/S OERLIKON FRICTION SYSTEM (INDIA) PRIVATE LIMITED
Advance Ruling No.118/AAR/2023 Dated:29.11.2023 · Tamil Nadu
Questions before the authority
- Whether the activity of bonding of carbon material friction strip to Metal components amounts to supply of service(job work) falling under SAC 9988?
- Whether the activity of bonding of carbon material friction strip to Metal components amounts to composite supply of goods under heading 6815 of the First Schedule to Customs Tariff Act?
- Whether the activity of bonding of carbon material friction strip to Metal components amounts to composite supply of goods under heading 8708 of the First Schedule to Customs Tariff Act?
Facts
The applicant receives metal components (Synchronizer Cores) from customers under a job work arrangement. They bond imported carbon friction strips to these cores and return the finished Synchronizer rings to the customer. The applicant charges for the cost of the carbon material, conversion costs, and profit.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification as job work service | Amounts to supply of job work services under SAC 9988 None |
| Classification as composite supply of goods (6815) | Not applicable As discussed in para 6.3 |
| Classification as composite supply of goods (8708) | Not applicable As discussed in para 6.3 |
The Authority ruled that the activity constitutes a supply of job work services under SAC 9988. It rejected the applicant's contention that the activity could be classified as a composite supply of goods, noting that the entire process is a service of treatment or process applied to another person's goods.
Reasoning
The Authority relied on Section 7 of the CGST Act and Schedule II, which classifies any treatment or process applied to another person's goods as a supply of services. It determined that the activity falls under SAC 9988, which covers manufacturing services on physical inputs owned by others. The Authority clarified that the use of the job worker's own materials, such as the carbon strips, does not alter the nature of the activity as a job work service. Consequently, the concept of composite supply of goods was deemed inapplicable.
Provisions relied on
- Section 2(68) of the CGST Act, 2017
- Section 7 of the CGST Act, 2017
- Schedule II of the CGST Act, 2017
- Section 15 of the CGST Act, 2017
- Notification No.11/2017-CT(Rate) dated 28.06.2017
- Circular No.38/12/2018-GST dated 26.03.2018
For the practitioner
This ruling confirms that **job work involving the use of the job worker's own materials** remains classifiable as a service under SAC 9988 rather than a supply of goods. It serves as a precedent for manufacturers performing value-added processes on customer-owned components. Practitioners should note that the ruling emphasizes the **substance of the transaction** over the description used in tax invoices.
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/118_oerlikon.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
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