Applicability of GST on manufacturing activity done by contractor

[MohanLal tiwari]

Dear Panelists,

We are manufacturer of castings / machinery parts (mainly for Railways) falling under 8607. In our factory premises, we are providing all required materials, machinery & equipment etc and getting in-process manufacturing activities done through contractors for various operation like molding / finishing / machining etc. During Excise & Service tax regime, such services were not attributable to service tax.

Now, most of contractors are GST compliance and issuing invoices charging GST @18% which is getting accumulated with us by way of ITC.

Kindly advise how far it is correct to charge GST for in-process manufacturing activities getting done by the contractors. Also advise remedy to avoid charging GST as the ITC is getting accumulated with us.

AI Summary

GST applicability on contractor in process manufacturing: treated as taxable supply or job work, attracting GST and ITC consequences.
Applicability of GST arises where a manufacturer engages contractors on its premises for in process manufacturing; contractors' invoices charging tax result in accumulation of Input Tax Credit. The activity is characterised as a taxable supply of services-either manpower supply if labour is supplied on site, or job work-and therefore attracts GST; liabilities should be met and operations planned under the GST framework rather than to avoid tax.