GST on scrap sales credit note by job worker

[Asked by Guest]

Sir,

We are sending the semi finished goods for machining to job worker. After machining the job worker sends the finished goods to us. The swarf / borings generated out of machining is being sold by the job worker on payment of applicable GST.

The job worker issues us the credit note for the material value sold by them on our behalf.

In this context I request your valuable opinion whether the GST applicable on credit note issued by the job worker for the material value.

Regards

K Srinivasan

AI Summary

GST on scrap sales: tax follows the supplier status; credit notes for scrap are accounting adjustments, not new GST triggers.
Under Section 143(5) CGST, scrap from job work supplied by a registered job worker is a supply by the job worker and taxed on the scrap sale; if the job worker is unregistered, the principal is treated as the supplier. A credit note issued by the job worker for material value functions as an adjustment against job charges and, where scrap has been taxed on sale by the job worker, does not by itself attract separate GST; parties may instead negotiate net job charges to reflect scrap retention, but accounting and return positions must remain consistent with who is the supplier.