Leasing and Job Work

[HNA CharteredAccountants]

1. M/s A has given on lease factory consisting of land, buildings, plant and machinery, and other infrastructure situated on land to M/s Y on payment of monthly rent of Rs. 5 Lakh. The workers and other staff employed by M/s A have not been transferred to M/s Y. They continue to be employed by M/s A.

2. M/s Y has declared the said premises as an additional place of business in their GST registration and M/s Y has employed M/s Z as works managers as overall in charge of activity carried out at above factors. M/s Y has procured raw material for manufacture of product X classifiable under Chapter 62.

3. M/s Y has paid M/s A monthly rent of Rs. 5 Lakh plus the amount of salaries and wages for the workers and other staff employed by M/s A.

4. M/s A has approached you for advising on compliance with GST provision and requested for opinion on the following issues.

(a) Will the activity of M/s A be considered as job work as input procured by M/s Y is processed by utilizing plant and Machinery and workers?

(b) Will the answer be different if RM is procured by M/s A directly and reimbursement of amount is claimed by raising tax invoice on M/s Y?

(c) If not where the activity of M/s A will be classified?

(d) Will your answer be different if consideration of M/s A is based on the quantity of final product manufactured at the above factory with the minimum guarantee amount of Rs. 2 lakhs per month?

(d1) Should the rent amount received by M/s A be added to the job work charges received by M/s Y?

(e) Will M/s A be entitled for the credit on various expenses like security providing, bus services to the employee and other expenses incurred on employees by M/s A?

AI Summary

Leasing of industrial premises treated as taxable supply of services, not job work, with ITC subject to restrictions.
Leasing a factory with retained employees to a manufacturer is not job work; it is a supply of services comprising lease/rental of immovable property and, where applicable, manpower supply. Procurement of raw materials on reimbursement or output-linked consideration does not change this classification. Rent is a separate outward supply and need not be aggregated with job work charges. Input tax credit on expenses is subject to statutory restrictions and requires appropriate documentation.