Job worker retains scrap - should principal raise tax invoice for transferring ownership.

[Chirag Mehta]

Hello,

Lets say Job worker(Registered) has sold scrap or lets say retained. Principal asks to consider it payment towards job charges and pays remainder amount. 

The issue is, for above situation, whether Principal is required to issue Tax Invoice for Scrap to Job worker? 

Many experts believe Transaction Value = Monetary Consideration + Value of Scrap/by-products retained by Job worker. Then Principal should issue invoice for scrap/by products to Job worker. The Circular No. 38/12/2018 doesnt explicitly state that but we are expected to follow GST acts regarding invoicing and valuation.

So, what is the standard practice whether invoice should be given or not?

Thanks.

AI Summary

Job worker can sell scrap directly from premises with principal's agreement under Section 143(5) A registered job worker retained scrap and the principal considered it as payment toward job charges. The query addressed whether the principal must issue a tax invoice for transferring scrap ownership to the job worker. Experts debated that transaction value includes monetary consideration plus scrap value, requiring the principal to invoice the job worker for scrap. However, Section 143(5) of CGST Act allows registered job workers to sell scrap directly. The discussion concluded that while the principal owns the scrap, job workers can sell it from their premises with mutual agreement and issue financial credit notes rather than GST credit notes when selling on the principal's account.