GST Complaince_in Deduction of amount of Contractor

[Prem Choudhary]

Dear Expert

please advice in following in relation to

Scenario:- The ABC Cement Compnay was entered Contract for fabrication works (Mechanical ) under service Contract. In Contract, material (Steel) has been issued by ABC to Contractor for fabrication. After completion of work ,in material reconciliation of Steel, shortage has been found and ABC has decided to debit the vendor of shortage of Steel ( as penalty) .

Issue:-In above Scenario, Since the material(Steel) is part of ABC and steel was not supplied by Contrator :-

• Whether GST Credit Note can raise by Contractor ? or

• ABC should issue Tax Invoice with @18% of GST , Considering supply as per Schedule –II Point-5(e)

please advice above issue

AI Summary

Treatment of short-supplied jobwork materials: deemed supply requires tax invoice and tax liability on recipient or owner.
Goods sent for job work that are short at the contractor's end are treated as goods supplied and require issuance of a tax invoice charging the contractor for the shortage; if goods are not returned within the statutory period they are deemed supplied and tax (plus interest) is chargeable. If the inputs were used in taxable processing within the allowable time, the owner generally need not reverse input tax credit, subject to job-work timing rules.