Whether cenvat credit availed on Capital goods used for job work process for other person.

[samiuddin ansari]

Sir,

I would like to know as to whether I have to reverse the Cenvat credit availed on Capital Goods i.e. VMC Machines proportionatly, if used for the purpose of job-work process on goods sent by another manufacturere as well as for the process of our own manufactured goods. Kindly, through some light on the issue with supportive provisions of laws or Circulars/clarifications issued by the Board.

Please solicit necessary guidance in to the matter.

Thanks with regards,

(S.N.Ansari)

[Rajagopalan Ranganathan]

Sir,

Please clarify whether this question is related to Cenvat Credit Rules, 2004 or CGST Act, 2017.

[Himansu Sekhar]

If you have purchased capital goods, there is no need to reverse the credit, job work under gst is not exempted.

[KASTURI SETHI]

I support the views of Sh.Himansu Sekhar, an expert. It is also a matter of common knowledge that job worker works for and on behalf of jobbee (Principal). For capital goods there is nothing regarding reversal on pro rata basis.

[Himansu Sekhar]

Thank you sir

[Ganeshan Kalyani]

You are generous sir. On the machinery of yours job worker is providing service to other party also.

[KASTURI SETHI]

I am not generous. Regarding Capital Goods Govt. Is liberal. If we go into depth and x-ray ITC on Capital Goods is admissible. There is no denial on the ground some part is used by job worker and some part is used by principal. Such like restriction is in respect of input.

[samiuddin ansari]

Sir, my question relates to Cenvat Credit Rules, 2004 i.e. Cenvat credit availed on Capital Goods used for a job -work process of another i.e. goods supplied by another registered or non-registered person.

Thanks with regard,

[KASTURI SETHI]

It is a matter of common knowledge that if any manufacturer / job worker uses capital goods in or I n relation to manufacture of dutiable final product he can take credit. So if a job worker pays duty on behalf of principal manufacture , the job worker can take credit on Capital Goods. If job worker does not pay duty and return the job worked goods to the principal availing exemption under notification no. 214/86 as amended, he cannot take credit. If you purchase capital goods from unregistered dealer, you cannot take credit. You may have paid duty. There is no question of taking credit by unregistered job worker.

[KASTURI SETHI]

In pre-GST era, if capital goods were partially used in manufacture of exempted goods and partially used in dutiable goods, full credit on those capital goods was allowed.

AI Summary

Cenvat credit on capital goods allowed even when used for job work, subject to duty payment and supplier registration conditions. Cenvat credit on capital goods is generally admissible when those goods are used for job-work processes for other principals and need not be reversed pro rata solely because they serve multiple job-work uses. A job worker who pays duty on behalf of the principal and manufactures dutiable products may take credit; where goods are returned under an exemption without duty discharge, the job worker cannot claim credit. Purchase from an unregistered supplier also precludes credit.