GST on amount debited to Jobworker against excess rejection

[sunilkumar bhageria]

We are procuring plastic items on Job work basis. For which we are providing plastic granuels to Job worker who after processsing this granuels supply us plastic components. During this process some rejection of material take place the job worker returns back to us this rejection but the value of such rejcetion is very less than the fresh granuels. We have restricted the rejection to 2 % of total input material but in some cases the Job worker makes more rejection hence we have debited the job worker for such excess rejection with difference in the value of granuels and relisable value of rejections.My query is Will this debit amount attracts GST or not.

[KASTURI SETHI]

Yes. It is taxable. As per Section 143 (2) & (3) of CGST Act, 2017, the Principal (owner) is responsible for tax-liability on the inputs or Capital Goods or semi-finished goods sent to the job-worker. If the goods are received back short or excess wastage claimed by the job-worker, you are to pay tax on that qty. of goods..

[sunilkumar bhageria]

The total material returned back by the Job worker is not short only thing OK qty is less while quantity of waste material is higher . The waste material returned back by the job worker is having lower value therefore differential cost debited to job worker on which GST liability is under query.

[KASTURI SETHI]

GST is leviable.

AI Summary

Taxability of job-work debits: GST applies where principal debits job-worker for excess rejection value for shortfall. GST is leviable where the principal debits a job-worker for excess rejection or higher wastage of inputs supplied for job-work; the principal remains responsible for tax on inputs, capital goods or semi-finished goods sent out, and must account for tax on any quantity or value shortfall, making the differential recovery from the job-worker taxable.