QUESTION

Dear Sir, We are a readymade garment manufacturing company registered under GST. We have engaged one contractor who comes to the factory along with his labour for making readymade garments as per the drawings provided by us. We provide him all the infrastructure viz. machinery, fabrics and trims for conversion into garment. The payment is being made on the basis of number of garments made by him in a month. We are not concerned how much labour he has employed and we have no control on the labour whatso ever. We have given him a target to make specific minimum number of garments in a month. We treat this as job-work which attract a GST rate of 5% as per notification No. 11/2017 -CGST (Rate) dated 28.6.2017. There is also one more entry viz. `Tailoring services` in the said notification which attracts GST rate 5%. In the given situation, please let us know whether we can treat this as supply of `Tailoring Services` and ask the contractor to bill us accordingly. This will reduce our compliance of filing GSTR-4 return as well as maintenance of records for showing job-work. We wish to mention here that as per Circular No. 190/9/2015-Service Tax dated 15.12.2015, the above activity has been treated as job-work. Also as per Mumbai Tribunal`s decision - 2015-TIOL-2589-CESTAT-MUM- such activity has been held as job-work. Kindly give your valuable opinion.

ANSWER

Facts of the case:A readymade garment manufacturing company registered under GST engaged one contractor who comes to the factory along with his labour for making readymade garments as per the drawings provided by company. Company provides him all the infrastructure viz. machinery, fabrics and trims for conversion into garment. The payment is being made on the basis of number of garments made by him in a month. Company is not concerned how much labour he has employed and has no control on the labour. whether to treat this as supply of `Tailoring Services` or as job work.

Law Applicable: Notification 11/2017 Central Tax (Rate)
26. Heading 9988 (Manufacturing services on physical inputs (goods) owned by others)
(i) Services by way of job work in relation to-
(a) Printing of newspapers;
(b) Textiles and textile products falling under Chapter 50 to 63 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975)
(c) all products other than diamonds falling under Chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975)
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(ia) Services by way of job work in relation to-
(a) manufacture of umbrella;
(b) printing of all goods falling under Chapter 48 or 49, which attract CGST @ 6 per cent. 6
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(id) Services by way of job work other than (i), (ia), (ib) and (ic) above; 6 -
(ii) Services by way of any treatment or process on goods belonging to another person, in relation to -
(a) printing of newspapers;
(b) printing of books (including Braille books), journals and periodicals.
(c) printing of all goods falling under Chapter 48 or 49, which attract CGST @ 2.5 per cent. or Nil 2.5

(iia) Services by way of any treatment or process on goods belonging to another person, in relation to printing of all goods falling under Chapter 48 or 49, which attract CGST @ 6 per cent. 6 -
(iii) Tailoring services. 2.5 -
(iv) Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ib), (ic), (id), (ii), (iia) and (iii) above. 9
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Interpretation: Job work means any treatment or process undertaken by a person on goods belonging to another registered person.
In your case contractor (job worker) is doing job work on material provided by you (Principal). Thus this activity will be covered under job work service.
Vide Notification No. 01/2018 Central Tax (rate) wef 25-01-2018 new entry is inserted in Notification No. 11/2017 Central tax (rate) under HSN code 9988 as 'Tailoring Services'.

Further as per General Rules of Interpretation:
3. When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows : (a) The heading which provides the most specific description shall be preferred to headings providing a more general description.

In the given case tailoring service is more specific description as compared to job work service (general description).

Conclusion:Thus the above activity is to be classified under Tailoring service.(Reply dt.18-06-2020)