Whether filling chemical into drums treated as a job work?

[Yatin Bhopi]

Dear expert,

We are manufactures of chemicals. We sale our products in drums as well as in tanker. Now our drum filling machine is out of service. To complete the customer commitments, we wish to do this durm filling activity with job worker who is registered under GST.

my query is, whether sending finished goods to the job worker for filling drums construed as a job work activity? can we follow job work procedure?

[CASeetharaman KC]

“job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly. This is the definition of Job Work given in clause (68) of section 2 of the CGST Act, 2017. The above activity would fall under job work as filling drums could be classified as a process. Please go through Circular no 38/12/2018 dated 26th March 2018 which gives most of the clarifications sought by you

[KASTURI SETHI]

I concur with the views of Sh.Seetharaman KC, CA.

(1) Also read Section 143 of the CGST Act which provides that the principal may send and/or bring back inputs/capital goods for job work without payment of tax, under intimation to the proper officer and subject to the prescribed conditions.

(2) Also see Rule 45 of the CGST Rules, 2017 which provides that the inputs, semi-finished goods or capital goods being sent for job shall be sent under the cover of a challan issued by the principal, containing the details specified in rule 55 of the CGST Rules. This rule has been amended vide notification No. 14/2018-Central tax, dated 23-3-2018 to provide that a job worker may endorse the challan issued by the principal.

(3) The principal is also required to file FORM GST ITC-04 every quarter. stating the said details.

[Alkesh Jani]

Hon'ble Experts,

Please give your valuable views that can HSN Code "998540", Packaging services of goods for others, be applicable in the instant case?

This query is to enrich my knowledge, through your guidance.

Thanks,

With due regards

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of the experts.

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

Pl. refer to a query dated 13.2.19 (Serial No.3 above). It is pertinent to know what is packaging service and what is packing service and what is the difference between both activities. There is a lot of difference between the two. It is amply clear from legal definition of 'packing' and 'Packaging'. If we see the definition of packaging service provided in the erstwhile Section 65(76b) of the Act read with Board's Instruction under F.No.B1/6/2005-TRU dated 27.7.2005 and the present definition of packaging service under GST, the activity of filling drum does not fall under packaging service. It is packing container. Job work procedure can be followed.

[Alkesh Jani]

Dear Kasturiji Sir,

Thanks for enriching my knowledge, as you have been doing in past also. As GST is new and requires micro-scope to distinguish the transaction and to decide whether it is supply of goods or service or both. The guidance from all experts is always very helpful.

Thanks again,

With due regards,

[Yatin Bhopi]

Thanks a lot for sharing your valuable opinion.

If we check Section 143 everywhere word “input and capital goods or intermediate” is mentioned. Since product we wish to send to job worker is our finished goods and we are not going to do any activity in our factory after receipt from job worker. The filled drums will be supply to our customer as it is.

Will you please share your views

[CASeetharaman KC]

Section 143 (1) (b) states that the principal can supply such inputs after completion of the job work provided again that the Principal declares the place of business of the job worker as his additional place of business except in a case-

(i) where the job worker is registered under section 25; or

(ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner.

Hence even though the material supplied by you is a finished product the same is an input for the job worker as without filling the drums the finished product does not come into existence. As such there is a clear provision where the goods can even be supplied from the premises of the job worker. Point to be noted here is that the Principal would be ultimately responsible to maintain proper accounts and ensure that proper duty has been paid on the final product

[KASTURI SETHI]

Goods cannot be called finished goods until and unless these are packed/packaged properly so that these become marketable. Goods are neither safe nor marketable without packing. Packing is also process of manufacture. Can you sell /supply the goods without packing container ?See the definition of job work given below:

(1) Meaning of Job work

(a) Job work [Section 2(68) of CGST Act, 2017]. - “Job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly.

Supply of goods by the Principal to the job worker for job work is not supply. No GST is levaible but subject to Section 143 of CGST Act, 2017. If job worker supply these goods to another person after doing job work then it is supply.

See Explanation below Sub section (5) to Section 143. For the purpose of job work, input includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or the job worker.

Your goods are semi-finished/intermediate goods without the process of packing.

Read word for word carefully.

 

[Yatin Bhopi]

Thank you very much Sir

AI Summary

Job work classification: filling drums treated as job work permitting sending goods under prescribed job work procedure.
Filling chemical drums by an external contractor is a job work activity as it is a treatment or process on goods belonging to another registered person; the principal may send goods without payment of tax subject to job work compliance, must use a prescribed challan which the job worker may endorse, file the quarterly return reporting job work movements, maintain accounts, and may declare the job worker premises as an additional place of business where permitted.