Job work in GST

[Narendra Soni]

Dear Expert,

Please suggest whether job work is taxable in GST.

Taxable for Principle & for Job worker, registered and unregistered supplier & job worker

If returned after job working to principal, and

If direct sale/export from the premises of Job worker.

Thanks.

[DR.MARIAPPAN GOVINDARAJAN]

In my view it will be there. However it can be ascertained on the outcome of regular Acts and Rules.

[Surender Gupta]

As per the scheme under the present Model Draft GST law, Goods will be allowed to be send for Job Work without payment of Tax.

Further, subject to conditions and permissions, goods will be allowed either to bring back or to sale / export directly from the premises of Job Worker.

Refer:

Section 16A

:

Taking input tax credit in respect of inputs sent for job work

and

Section 43A

:

Special procedure for removal of goods for certain purposes

Here, one more concern arises, that the provisions relating to Job Work has been provided under the proposed Model CGST / SGST law, therefore it is to be seen how it will be applicable for inter-state movement of goods since there is no corresponding provision in the proposed draft IGST law.

[Narendra Soni]

Thanks Mr.Surender Gupta for proper clarification with section in this matter.

[Ganeshan Kalyani]

The condition for sending the raw material to job worker and receiving it back or selling it from job worker premises is framed same as it is in current excise law. The time period of capital goods sending to job worker is also same in draft model gst law.

Thanks experts to enlightening the subject.

[YAGAY andSUN]

Only one major change that if goods are not returned within prescribed time limit then interest along with Duty needs to be reversed and at the event of return of goods interest along with duty shall be taken back.

[YAGAY andSUN]

Comptroller Auditor General's Objections on CENVAT Credit

CAG of India had conducted a Performance Audit on CENVAT credit scheme, to seek an assurance that provisions in the Act/rules/clarifications/procedures as laid down are unambiguous and adequate to safeguard any misuse of the CENVAT credit scheme and that the internal control and monitoring mechanism were in place and effective.

CAG found several provisions of the law inadequate in its recent report to Parliament.

Absence of provision for charging interest on reversal of credit for non-receipt/delayed receipt of goods sent for job work within 180 days

Inputs or semi-finished goods sent to job worker under rule 4(5) (a) of CENVAT Credit Rules, 2004, should be returned to the factory within 180 days. For failure to do so proportionate CENVAT credit on inputs/semi-finished goods not received back is required to be reversed. However, in case of delay in reversal of credit, there is no specific provision for charging interest on such delayed reversal. This results in loss of interest to the Government.

Audit Recommends:

The Government may consider inserting provision for charging interest in case of non/delayed reversal of CENVAT credit in respect of non/delayed receipt of goods sent to job worker. The Tariff Conference held on 28 and 29 October 2015 had decided that the interest is liable to be paid after the expiry of period of 180 days and there is no need for insertion of provision for charging interest. However, Audit is of the opinion that to avoid ambiguity there is a need to insert specific provision in this regard.

[Ganeshan Kalyani]

Yes the good part is interest paid is also proposed to be cenvatable. Thanks.

[YAGAY andSUN]

Irony is that working capital shall be blocked in such scenario which is life blood for Business/Trade.

[Ganeshan Kalyani]

It will enduce assessee to do timely conplaince.

AI Summary

Job work in GST: inputs may be sent without tax but return, direct sale or export affect credit and interest. Under the draft GST law, goods can be sent to a job worker without payment of tax and, subject to prescribed conditions, may be returned to the principal or sold/exported directly from the job worker's premises. Existing excise style time limits for return are retained; failure to return within the period requires reversal of input credit and attracts interest on delayed reversal. The CAG recommended explicit statutory provision for charging such interest. A gap is noted in the draft IGST law for inter state movements.