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Job Work as per Notification No. 20/2019- Central Tax (Rate) dated 30-09-19, Goods and Services Tax - GST

Issue Id: - 115479
Dated: 1-10-2019
By:- Sushant Karbhari
Job Work as per Notification No. 20/2019- Central Tax (Rate) dated 30-09-19

  • Contents

Hello!

What is the exact interpretation of the new wording inserted in Notification No. 20/2019- Central Tax (Rate) dated 30-09-19 as per serial number 26 entry no (id) in item (iv) of Original notification dated 28th June 2017?

Does this mean, other than entries of (i),(ia),(ib) and (ic) all other job work will go under 12% instead of the earlier tax rate of 18%?

This would create a massive impact on the whole job work industry.

Need views on the same with regard to interpretation.

Thanks in advance!

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Posts / Replies

Showing Replies 1 to 15 of 19 Records

1 Dated: 1-10-2019
By:- Rajagopalan Ranganathan

Sir,

As per the amending Notification services by way of job work other than (i), (ia), (ib) and (ic) will attract CGST @6% and SGST @6%.


2 Dated: 2-10-2019
By:- KASTURI SETHI

Dear querist,

Major change (relief) has been granted to the job work items mentioned against serial no.26(ii) by reducing rate of tax from 18% to 12 % vide Notification No.20/19-CT(R) dated 30.9.19. Rate of tax for job work on diamond stands reduced. Only one item i.e. job work on bus body has been specifically excluded from Serial No.26(ii) of Notification No.11/17-CT(R) dated 28.6.17 and rate of tax on this job-work remains the same i.e.18%. Hence trade (ultimately) consumer is the beneficiary. It is my observation that if rate of tax is lower, higher is the collection of revenue. This is strategy of Govt. in the interest of nation.

What do you mean by, "This would create a massive impact on the whole job work industry" ?Positively or negatively ? What is brewing in your mind ? I could not get. Pl. ask specifically for a healthy discussion as well as enrichment of my knowledge from your side.


3 Dated: 2-10-2019
By:- Sushant Karbhari

Hello Sir's!

Thank you experts for your valuable replies,

I specified "This would create a massive impact on the whole job work industry" because there seems to be different interpretation on the same from different people.

My Interpretation on the same is:

If we add in serial number 26, in item (iv), after the brackets, words and figures “(ia),”,"...." ""(id),” shall be inserted in the sub clause (iv) of the Notification of 28th june 2017.

After the insertion of these words as per 30th Sept 2019 Notification, the new sub-clause (iv) @ 9% CGST and 9% SGST reads as follows:

(iv) Manufacturing services on physical inputs (goods) owned by others,other than

i)...

(ia)...

(ib)...

(ic)...

(id) Services by way of job work other than (i), (ia), (ib) and (ic) above

if we read this new amended clause (iv), there seems to be two types of scenarios covered here because of the words "other than" in clause (iv) main part and "other than" in (iv)(id),

First scenario: All manufacturing services on physical inputs ie: job Work Services resulting into emergence of new products as per manufacture definition of section of 2(72) of CGST act will go under CGST 9% and SGST 9%

Second Scenario: Services by way of job work ie: Pure job work labour,not manufacturing services and not getting covered in section 2(72) will go under CGST 6% and SGST 6%

If above is the case,every job worker would have to differentiate transactions and rates on the basis of the same

Would like to have your valuable interpretation and views on the same.

Thanking you in advance.


4 Dated: 2-10-2019
By:- KASTURI SETHI

Dear Querist,

Your interpretation and understanding of the issues involved is correct. I agree with you. The whole issue or confusion revolves around what is 'manufacture' ? What is 'manufacturing service' ? What is the difference between the two ? How to differentiate from each other ? Whether any manufacturing service (treatment or process) amounts/culminates to manufacture or not is a hard nut to crack. In this context, one can take help from various decisions of AAR or Board's circular or case laws pertaining to pre-GST era or post-GST regime. There is a thin line between the two. It will always be prone to litigation. One decision is worth mentioning and that is appended below:

2018 (14) G.S.T.L. 571 (App. A.A.R. - GST) = 2018 (7) TMI 511 - AUTHORITY FOR ADVANCE RULING - MAHARASHTRA


5 Dated: 3-10-2019
By:- Sushant Karbhari

Thank you for the reference of the AAR Judgement, Kasturi Sethi Sir!

It seems the order and our interpretation of the wordings of Notification No-20/2019 dated 30th September Serial no 26 are on similar lines.

This may create litigations for the industry going ahead unless there is any clarification on the same from the department.


6 Dated: 3-10-2019
By:- KASTURI SETHI

Dear Sh.Sushant Ji,

There are so many decisions of AARs on this issue wherein 'Manufacture' and 'manufacturing services' have been differentiated. Manufacturing service may or may not culminate into manufacture but 'Manufacturing process' will lead to manufacture. Manufacturing process can change the nature, character and function of the goods but the manufacturing service may or may not bring such change.. We can say that manufacturing process is the integral part of 'manufacture'. Manufacturing service may or may not be integral part of manufacture. It depends upon the nature of 'manufacturing service'. There are so many examples to this effect available on 'google'. You have gone into depth. I hope you are capable of searching such examples on various sites.It is a calk walk for you. I am of the view that there is no need to issue clarification by the Board. Any taxpayer has to segregate,'Manufacturing process', 'Manufacturing service' and 'Manufacture' to pay correct tax and also get legal benefit provided by Govt. in Notification No.20/19-CT(R) dated 30.9.19.


7 Dated: 4-10-2019
By:- Ganeshan Kalyani

Yes, there comes two different residual rates. The interpretation comes this way that 12% is for job work processing and 18% for the manufacturing process. As the discussion in noted in this forum the govt is giving additional task to the taxpayer to find out the nature of the process. If the process does not amounts to manufacture then there is a saving to the service recipient. However, there are possibility of receiving notices enquiring the nature of process and demand for the differential tax.


8 Dated: 9-10-2019
By:- mohan sehgal

Kasturiji,
Greetings!!!

There still confusion persists..I am stating here under views by more experts on the matter;

Kindly note both entries (26(id)and 26 (iv)look like the samebut there is a lot of difference between these two entries.After the careful reading of both entries,it i found that the term"JOB WORK" is used for entry no.26(id),whereas the term "Any TREATMENT OR PROCESS ON THE GOODS RELATED TO ANOTHER PERSON"has been used for entry no.26(iv)

The term job work has been defined u/s 2(^*)of the CGST Act,2017,as "Job work means any treatment or process undertaken by a person on goods belonging to another registered person and the expression"JOB WORKER" shall be construed accordingly."

As`perthe above defination it can be concluded that if treatment or process undertaken by a person on goods belonging to another registered person then it shall come under defination of JOB WORK but if treatment or process undertaken by a person on goods blonging to another unregisterd person,then it shall not come with th defination of Jobwork.Therefore,entry no.269id0is restricted only in cases where in any treatment or process is undertaken by a opers on on goods belonging to another person and entry no. 26(IV)is restricted to any treatment or process carried out on goods belonging to an unresgisterd person.

"Word MANUFACTURING HAS NOTHING TO DO WITH RATE OF GST FOR JOB WORK UNDER THESE TWO ENTERIES"

GST RATE ;12 % for all type of JOB WORK done for registered persons except the notified ones like Bus Bodies..

GST RATE; 18% for all.............for unregistered persons.

Mr.Arpit Haldia CA also agrees to the above conclusion.

Your Valued comments and from other Experts anxiously awaited. Regards and Thanks.


9 Dated: 10-10-2019
By:- KASTURI SETHI

Dear Sh.Mohan Sehgal Ji,

I have gone through your views on the issue. I am not concerned with who agrees with me or not. I have expressed my views on the issue and I stick to my views. In my view, there are flaws in the laws which have created confusion and made the simple concept of 'job-work' complicated. Moreover, the phrase,'manufacturing services' must have been defined with illustrations before enforcing GST Acts. Here it is pertinent to mention that during the Service Tax regime, 'Any process which amounted to manufacture' was included in the Negative List'. Still the concept of 'manufacture' is not out of the gamut of GST.

However, I am of the view that after issuance of notification no.20/19-CT(Rate) dated 30.9.19, the situation calls for clarification from the Board so that litigation should be avoided..


10 Dated: 10-10-2019
By:- atul rathod

Dear Mohan Sehgal Ji,

I dont think CA Arpit haldia has agreed for that manufacturing word does not have any relavance. the last para from his article is posted as below:

Last but not the least, heading of 9988 covers “Manufacturing services on physical inputs (goods) owned by others” however entry 26(i) pertains to job work which also covers activities which do not amount to “manufacturing”. So what role does “heading plays while interpreting the “Entry” or can heading restrict the meaning of the entry provided. Interesting times ahead…

and thats where the confusion arises.


11 Dated: 10-10-2019
By:- KASTURI SETHI

Difference of opinion is always better for all. It leads to innovative ideas.


12 Dated: 10-10-2019
By:- mohan sehgal

Mr.Atul Rathore

Thanks for letting me know the right interpretation...but the confusion still persist...

However ,Mr.Arpit Haldia,CA concluded in his article;

It is very clearly evident that the scope of ENTRy 26(i),,26(ia),26(ib),26(ic) and (26id) is only restricted to any TREATMENT or PROCESS on goods belong to registered persons. However ,scope of entry 26(ii),26(iia),26(III) and 26 (iv)extends to treatement or process on goods belonging to unregistered persons as well.


13 Dated: 10-10-2019
By:- mohan sehgal

Just received more clarifications and advice from other sources...The conclusion is the same as posted earlier

The reduced rate of 12% will be applicable to all the job works other than bus building job works.


14 Dated: 11-10-2019
By:- KASTURI SETHI

Consequent upon issuance of Notification No. 20/19-CT(Rate) dated 30.9.19, I am getting a feeling that we must learn the art of praying effectively to God !! (Emphasis is supplied on 'job-work')


15 Dated: 12-10-2019
By:- Pankaj Manchanda

I am not expert, but conclusion according to me is :

Manufacturing Services on goods owned by other = 18%

Jobwork on goods owned by other = 12%*

* Jobwork means - Refurbshing of Tools, Repairing of Machine Parts, Service Engineeer Visit etc.


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