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 work scrap taxation turns on ownership, agreement terms, and direct sale by registered job worker under GST.
GST treatment of scrap or by-products generated during job work depends on the ownership of the goods, the agreement between principal and job worker, and the intended mode of disposal. The discussion notes that the principal is generally treated as the owner of inputs sent for job work and of waste, scrap, or by-products arising during the process, with tax and return obligations continuing under the job-work framework. It also explains that under section 143(5), a registered job worker may supply waste and scrap directly from his premises, subject to tax and mutual agreement.