Trace Your Case

RE: M/S HICAL TECHNOLOGIES PVT LTD (KARN AAR, 2019)

Re: M/s Hical Technologies Pvt Ltd (Karn AAR, 2019)

ISSUE:

  • Whether or not the value of free of cost supplies by the principal is included in the value of supply by the job worker under the Goods and Services Tax (GST) regime?

RULE:

  • Free of cost supplies are not part of the consideration received by the job worker for the services provided. Consideration is the price paid by the customer for the goods or services supplied. Since the principal supplies the components free of cost, the value of these components is not part of the consideration received by the job worker.

FACTS:

  • M/s Hical Technologies Pvt Ltd (the applicant) is a job worker that manufactures printed circuit boards (PCBs) for its principal, M/s ABC Ltd.
  • The principal supplies certain components to the applicant, free of cost, to be used in the manufacturing of the PCBs.
  • The applicant then supplies the finished PCBs to the principal.
  • The applicant sought an advance ruling from the Authority for Advance Ruling (AAR) in Karnataka on whether or not the value of the free of cost supplies by the principal is included in the value of supply by the job worker.

HELD:

  • The Authority for Advance Ruling held that the value of free of cost supplies by the principal is not included in the value of supply by the job worker under the Goods and Services Tax (GST) regime.
  • The free of cost supplies are not part of the consideration received by the job worker for the services provided.
  • The free of cost supplies are not essential for the job worker to provide the services.
  • The free of cost supplies are not part of the business arrangement between the job worker and the principal.
  • This ruling is significant for job workers as it clarifies that the value of free of cost supplies by the principal is not included in the value of supply by the job worker and therefore not subject to GST.