MOOWR - Job work by unit having the same GST

[Danish Azfar]

Hi Expert, 

Company A has 2 units in the same state. 1 Unit is MOOWR approved, while another unit is not. Unit 1 imports the Raw Materials under MOOWR and then sends the Raw Materials for Job work to another non-MOOWR-approved unit? After the Job work is completed, the non-MOOWR-approved unit sends the finished goods to the approved MOOWR unit, and the actual selling to the final customer will happen from the approved MOOWR unit.  is this allowed? 

[Sadanand Bulbule]

In terms of Section 143 of the CGST Act, such job work facility is available. However for movement of goods between intra-GSTIN [same] units, a delivery challan must be issued and all connected records be maintained as per Rule 45 of the CGST Rules.

[Sadanand Bulbule]

In my limited understanding, it should remain intact. Anyway consult others for expert opinion.

[Danish Azfar]

Dear Sir, 

Thanks a lot for your valuable reply. 

In terms of GST, the query is clear to us. What about from the MOOWR perspective? Will the benefits of MOOWR remain for such a kind of transition? 
 

[YAGAY and SUN]

Yes, the described transaction structure is generally permissible under the MOOWR (Manufacture and Other Operations in Warehouse) Scheme, 2019, provided certain regulatory conditions are met. In this case, Unit 1, which is MOOWR approved, imports raw materials under the duty-deferred mechanism. These imported raw materials can be sent to another unit (Unit 2), which is not MOOWR approved, for job work purposes. This is allowed under the MOOWR scheme, as long as the goods are not cleared for home consumption and are returned to the bonded premises (Unit 1) within the prescribed time limit, typically six months, which can be extended upon approval. It is crucial that Unit 1 maintains proper documentation, such as job work challans, stock records, and returns as required under the Customs Act and MOOWR regulations.

From a customs standpoint, no duty is payable at the time of transferring raw materials to the job worker or when the finished goods are returned to the MOOWR unit. The duty becomes payable only when the goods are cleared from the bonded premises for home consumption, or they may be exported without payment of duty, as per the scheme’s provisions. Regarding GST implications, if both units are registered under the same GSTIN within the same state, then the movement of goods for job work is not considered a supply, provided the goods are returned within the stipulated time under Section 143 of the CGST Act. However, if the units have separate GST registrations, then GST may be applicable on the movement of goods unless the job work procedure is correctly followed.

In conclusion, the transaction is legally allowed under MOOWR and GST laws, provided that proper procedural compliance is ensured, including maintenance of records, adherence to timelines, and payment of applicable duties and taxes at the appropriate stage.

[Danish Azfar]

@yagay andSun 

Dear Expert, 

Thanks for the explanation. Can we have legal backing for this transaction? Especially for MOOWR, stating that the intra-job work is allowed.

Thanks.

[YAGAY and SUN]

CBIC Circular No. 48/2020-Cus., dated October 27, 2020 clarifies various issues in case where the job work activity is done by a unit working under the MOOWR Scheme, for other units.

[Shilpi Jain]

Sending goods to a non-MOOWR unit for job work is allowed as a trade facilitation measure as clarified in the above referred circular.

[Danish Azfar]

@shilpi Jain Maam 

Thanks for the reply. 

Can you please also let me know if "Job work can be done by a unit having the same GST"

Explanation

Company A has 2 separate buildings, but in the same state, having the same GST. Building 1 is MOOWR approved, while Building 2 is not approved for MOOWR. Can Building 1 send the raw material to Building 2 for job work and after manufacturing Building 2 will send the FG to Building 1. In this scenario, the MOOWR benefits will be in there? 

[KASTURI SETHI]

No need to add after comprehensive reply by M/s. Yagay & Sun, Sirs.

AI Summary

MOOWR scheme: intra GSTIN job work permitted when goods are returned within the prescribed period, subject to procedural compliance.
Under the MOOWR framework, imported raw materials admitted under duty deferment may be sent to a non MOOWR unit for job work so long as goods are not cleared for home consumption and are returned to the bonded MOOWR premises within the prescribed period; duties are payable on clearance for home consumption, and exporters may clear without duty. For GST, movement between units under the same GSTIN in the same state for job work is not a supply if the goods are returned within the statutory period and delivery challans and records are maintained.