JOB WORK AND JOB WORKER UNDER GST REGIME (PART-2)
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 27-5-2017
Liability under existing Taxation Regime
* Where process amount to manufacture:
* If the process undertaken by the job worker amounts to manufacture/ deemed manufacture as per the definition, the job worker would be liable to pay a duty of excise on the goods so manufactured.
* Alternatively, the principal manufacturer who has supplied the goods for job work may furnish a declaration under Notification No. 214/86 dated 25.03.1986 (which exempts goods manufactured by a job worker from the duty of excise) based on which job worker would not be required to charge duty of excise.
* The goods must be used in the manufacturing process by the principal manufacturer which should result in a dutiable product being manufactured on which duty of excise is being charged.
* The activity undertaken by job worker would not be liable to service tax also a
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riate duty is not paid by the principal manufacturer, the job worker would be liable to charge service tax.
Valuation
The value of supply of goods or services in a case where the consideration is wholly in money, transaction value shall be considered for payment of tax, with various inclusions prescribed in the valuation provisions.
Certain inclusions in the valuation are as follows:
(i) Any taxes, duties, cesses, fees and charges levied under any statute, other than SGST/UTGST/CGST/IGST.
(ii) Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the services.
(iii) Incidental expenses.
(iv) Interest or late fee or penalty for late payment of any consideration of supply.
(v) Subsidies directly linked to the price excluding subsidies provided by the Central and State Governments.
However, transaction value will exclude discount, if any. P
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considering nature of the contract and the factors involved in the transaction.
Valuation Rules
* Value of supply of goods or services where the consideration is not wholly in money, value of supply shall-
* be the open market value of such supply,
* if the open market value is not available, be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money if such amount is known at the time of supply,
* if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality;
* if the value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of consideration in money and such further amount of money that is equivalent to consideration not in money.
* The value of the supply of goods or services or both between distinct persons or where the supplier and recipient are related, other than where the su
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ded to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. Credit will be allowed to the registered person subject to satisfaction of following conditions-
* he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax-paying documents as may be prescribed.
he has received the goods or services or both. However, in the case of job work, the principal shall be entitled to take credit of input tax on inputs or capital goods even if the inputs or capital goods are directly sent to a job worker for job-work without being first brought to his place of business.
the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply, and
he has furnished the return under section 39, i.e., combined return of outward and inward supplies
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ll be sent to the job worker under the cover of a challan issued by the principal, including where the inputs or capital goods are sent directly to job worker.
The challan issued by the principal to the job worker shall contain the details specified in rule Invoice 8, as under-
* date and number of the delivery challan,
* name, address, and GSTIN of the consigner, if registered,
* name, address, and GSTIN or UIN of the consignee, if registered,
* HSN code and description of goods,
* quantity (provisional, where the exact quantity being supplied is not known),
* taxable value,
* tax rate and tax amount – CGST, SGST/UTGST, IGST or cess, where the transportation is for supply to the consignee,
* place of supply, in the case of inter-State movement, and
* signature.
The details of challans in respect of goods dispatched to a job worker or received from a job worker during a tax period shall be included in FORM GSTR-1 furnished for that period.
If the inputs or capit
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If the mismatch is not rectified by the vendor in the month of communication, the recipient will be liable to pay the differential GST along with interest in the subsequent month. This provision places the liability for non-compliance on the recipient, i.e., job worker, as against their vendors.
Similar provisions have been prescribed wherein details of credit notes issued by a supplier have to match with the corresponding reduction of input tax credit claimed by the recipient. Accordingly, if the recipient does not adjust the input tax credit, the tax and interest would be recovered from the supplier. This provision places liability on tax-payers for non-compliance by vendors.
Input Service Distributor (ISD) Concept
As in the present Cenvat Credit Rules, ISD concept is proposed for transfer of credit of input services between two or more locations. ISD can transfer credit of all types of GST (CSGT, SGST/UTGST or IGST). Considering the possibility of multiple registrations State-wis
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vailability of the invoice, accordingly credit can be availed.
* If a manufacturer is not availing the credit of VAT currently due to restriction in the state VAT law or due to being in the composition scheme, then the credit can be availed based on the ascertainment of stock as on appointed day.
* However, if the credit of VAT is being currently availed, the same should be properly reflected in the last VAT/Service Tax returns to transfer such credits to the GST regime.
* The principal might have sent inputs, semi-finished goods and finish goods outside before appointed date (as of now it is 1st of July, 2017) for job work or testing. If these are received back before 6 months (i.e., 31st December 2017), GST will not be payable.
Specific Issues
Treatment of Scrap / Waste
The waste and scrap generated during the job work can be supplied by the job worker directly from his place of business, on payment of tax, if he is registered. If he is not registered, the same would be su
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ion of job-work) on payment of GST.
Steps to be taken by Job worker
Job workers are required to understand the provisions of GST laws in the light of what has been discussed in this Chapter. They may have to take following steps.
* Review of existing contracts as to –
(i) Processing structures and timings of completion of work
(ii) Valuation of processed goods
(iii) Respective obligations
(iv) FOC supplies
(v) Reverse charge mechanism
(vi) Tax implications
* Supplementary agreements/new contracts may be entered into for job work activities.
* To decide on having or not having two separate contracts for the supply of goods and services.
* To decide on having multiple supply locations/closing some of them.
* Review of procurement policy.
* Change in invoicing pattern.
* Working capital management.
* Treatment of security deposits other deductions.
* Accounting aspects.
* Training of personnel.
Concluded
The job worker should be aware of the provision
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es as a job worker conductor,
kindly advise and help the GST council to solve it. My view is that We should be also allowed to levy the GST on the jonbwork charge invoice and let the jobwork provider take the input credit,
kindly help to advise us in this matter whether our undeersstanig is correct or not,
best regards
Pankaj Gupta
9414075879
Dated: 28-5-2017
Reply By V Inamdar as =
Dear Sir,
Although you have suggested that principal need not to follow special job work procedure, instead he should sed inputs on payment of GST to job worker and in-turn after processing of goods job worker will return the goods on payment of GST.
Though logically the above suggestion / clarification made by Government in FAQ – answer to Q-15 of Chapter 9, is correct, but it is not backed by provisions of GST.
For example, the above is not fitting into the definition of term "supply" read with Sch.1 and 2 of CGST.
Can you please through light on this?
V.Inamdar
Mobile 9769005102
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