Direct delivery of moulds

[Kaustubh Karandikar]

XYZ Ltd. (Maharashtra) has purchased moulds from PQR (Chennai). Moulds will be delivered directly to XYZ’s third party manufacturer (ABC) in Chennai. ABC will use the moulds to make the products and sell the products to XYZ. On receipt, XYZ sells these products to its customers). XYZ does not charge ABC any amount for use of the moulds. Ownership of the moulds remains with XYZ. 1) Can XYZ claim ITC of moulds even though the moulds will not be in XYZ’s premises? 2) What is the procedure / documentation to be done by XYZ, PQR and ABC in this transaction?

[YAGAY andSUN]

Yes, XYZ can avail ITC on such Mould, as there is no specific time limit prescribed in GST Laws to get it back from the job worker. Delivery Challan will be issued by XYZ on ABC even moulds received directly by ABC.

Please check the job work procedure and sending the Mould related procedure.

[KASTURI SETHI]

In support of the reply of M/s.Yagay and Sun,Sir, the querist is requested to go through the following :-

1. Section 19(7) of CGST Act, 2017 as amended.

2. Board's Circular No.38/12/18-GST dated 26.3.18. Para Nos. 9.4(1), 9.5 & 9.6 refer.

3. Board's Circular No.47/21/2018-GST dated 8.6.18 Para No.1 refers.

4. Board's Circular No.88/7/2019-GST dated 1.2.19. Para No.4.10. refers.

AI Summary

Input Tax Credit on job-work goods allowed when moulds are sent directly to a job worker, subject to job-work documentation. The principal may avail Input Tax Credit on moulds sent directly to a job worker because there is no prescribed time limit for return from the job worker; the transfer should be treated under job-work provisions. The principal must issue a delivery challan for the moulds even when received directly by the job worker and must follow job-work procedures and retain records and documentary support as prescribed in relevant GST circulars to substantiate the ITC claim.