Any waste and scrap generated during the job work may be supplied by the job worker directly from his place of business on payment of tax if such job worker is registered, or by the principal, if the job worker is not registered.E. Transitional provisions for job worker under GST
Presently, a manufacturer can sent material for job work without payment of excise duty. As per Model GST Law if inputs or/ and semi-finished goods were sent for job work prior to introduction of GST law and were lying with the job worker, declaration shall be submitted by both manufacturer and job worker within specified period. The goods can be brought back to place of Principal manufacturer within 6 months from the appointed day without payment of tax. However, this period of 6 months can be extended by Commissioner for period of 2 months. If the material is not returned within 6 months (or further 2 months if extension is granted) from the appointed day, tax will be payable by job worker or manufacturer.F. Some test your knowledge questions (TYK Questions)TYK Q 1. Are the provisions of job-work applicable to all category of goods?Ans. No. The provisions relating to job-work are applicable only when registered taxable person intends to send taxable goods. In other words, these provisions are not applicable to exempted or non-taxable goods or when the sender is a person other than registered taxable person.TYK Q 2. What is job-work?
Ans. Section 2(62) of the MGL provides that “job-work” means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job-worker” shall be construed accordingly. This definition is much wider than the one given in Notification No. 214/86 – CE dated 23rd March, 1986 as amended, wherein job-work has been defined in such a manner so as to ensure that the activity of job-work must amount to manufacture. Thus the definition of jobwork tself reflects the change in basic scheme of taxation relating to job-work in the proposed GST regime.
TYK Q 3. What are the provisions concerning taking of ITC in respect of inputs sent to a job-worker?
Ans. In the MGL, aspects relating to taking input tax credit in respect of inputs/capital goods sent for job-work have been specifically dealt in Section 20, which provides that the credit of taxes paid on inputs or capital goods can be taken in the following manner: Principal shall be entitled to take credit of inputs sent to a job-worker if the said inputs, after completion of job-work are received back in 1 year from the date of being sent out. In case the inputs are sent directly to the job-worker, the date shall be counted from the date of receipt of inputs by job-worker. Further an amount equivalent to the input tax credit availed on such inputs has to be paid along with interest, in case the inputs are not received back within the specified time. The credit can be reclaimed when the inputs are actually received back.
TYK Q 4. Whether the principal is eligible to avail input tax credit of inputs sent to job worker for job work?
Ans. Yes, the principal is eligible to avail the input tax credit on inputs sent to job worker for job work in terms of Section 16A(2) of the MGL.
TYK Q 5. Whether principal has to reverse the input tax credit on inputs which have not been received back from the job worker within 1 year?
Ans. Yes, the principal has to reverse the credit along with interest on inputs which have not been received back from job worker within 1 year but he can reclaim the credit on receipt of inputs.
TYK Q 6. What is the liability of the principal if the capital goods sent to job worker have not been received within 3 years from the date of being sent?
Ans. Principal has to pay an amount equal to credit taken on such capital goods along with interest. But he can reclaim the credit on receipt of inputs.
TYK Q 7. Shall a manufacturer or a job worker become liable to pay tax if the inputs or semi-finished goods sent for job work under the earlier law are returned after completion of job work after the appointed day?
Ans. No tax shall be payable by the manufacturer or the job worker under the following circumstances:
• Inputs/ semi-finished goods are sent to the job worker in accordance with the provisions of the earlier law before the appointed day.
- The job worker returns the same within six months from the appointed day (or extended period of 02 months).
- Both the manufacturer and the job worker declare the details of inputs held in stock by
the job worker on the appointed day in the prescribed form.
TYK Q 8. What happens if the job worker does not return the goods within the specified time?
Ans. Tax would be payable by the job worker. Further, the manufacturer will also be liable to pay tax on expiry of the specified time limit.
TYK Q 9. Whether goods sent by a taxable person to a job-worker will be treated as supply and liable to GST? Why?
Ans. No. It will not be treated as a supply. In terms of proviso to Para 5 of Schedule I of the MGL the supply of goods by a registered taxable person (principal) to jobworker, in terms of Section 55, shall not be regarded as supply of goods. Therefore, it can be inferred that no GST shall be applicable on the goods supplied by the registered principal to a job-worker.
TYK Q 10. Whether the goods of principal directly supplied from the job-worker’s premises will be included in the aggregate turnover of the jobworker?
Ans. No. It will be included in the aggregate turnover of the principal.
TYK Q 11. Whether the job worker will have to be compulsorily registered?
Ans. No. Section 55 of MGL does not prescribe any such condition.
TYK Q 12. Is a job-worker required to take registration?
Ans. Yes, as a Job-worker would be a supplier of services, he would be required to obtain registration if his aggregate turnover exceeds the prescribed threshold.
TYK Q 13. Can a registered taxable person send goods without payment of tax to his job-worker?
Ans. Yes. Section 55 of the MGL provides that the registered taxable person (principal) can send the taxable goods to a job-worker for job-work without payment of tax. He can further send the goods from one job-worker to another job-worker and so on subject to certain condition.
It may be noted that provisions of Section 55 are not applicable if non-taxable or exempted goods are proposed to be sent for job-work.
TYK Q 14. Whether the goods will be permitted to be supplied from the place of business of a job worker?
Ans. Yes. But only in cases where the job worker is registered or the principal declares the place of business of the job worker as his additional place of business.
TYK Q 15. Can the principal supply the goods directly from the premises of the job-worker without bringing it back to his own premises?
Ans. Yes but with a rider that the principal should have declared the premises of such job-worker as his additional place of business or where the job-worker is a registered person or where the goods have been notified.
TYK Q 16. Under what circumstances can the principal directly supply goods from the premises of job-worker?
Ans. The goods can be supplied directly from the place of business of job-worker without declaring it as additional place of business in two circumstances namely where the job-worker is a registered taxable person or where the principal is engaged in supply of such goods as may be notified in this behalf.