Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

Impact under GST on Job work transactions

Goods and Service Tax - GST - By: - ashish chaudhary - Dated:- 5-9-2015 Last Replied Date:- 7-9-2015 - Goods and Service Tax (GST) upcoming in India is likely to result in widening the tax base substantially by covering large number of potential taxpayers who are hitherto not covered in the tax net either due to their activity not being in the nature of taxable or due to some exemption being claimed. It is talked that the present assessee base on Central side itself is expected to rise to approx .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

per the directions of principal manufacturer is known as job work. This is widely used method in many industries. Meaning of job work Job work is understood as the processing or working on goods supplied by the principal so as to complete a part or whole of the process. The work may be the initial process, intermediate process, assembly, packing or any other completion process. The goods sent for job work maybe raw material, component parts, semi finished goods and even finished goods. The resul .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

job worker/ so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for the aforesaid process. If one were to go by the definition of the term job work , it is evident the raw materials have to be supplied by another person. In Prestige Engineering India Ltd v CCE Meerut, - 1994 (9) TMI 66, the Supreme Court held that when the job worker contributed his own material to the goods supplied by the customer and eng .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ncluding any process incidental or ancillary to the completion of the manufactured product….. Various decision of the Supreme Court have arrived at a conclusion that where the product undergoes a change whereby a new article having a distinctive name, character or use emerges or not from the said process in manufacture (Honorable Supreme Court in Delhi Cloth and General Mills Co. Ltd Vs UOI 1962 (10) TMI 1 - SUPREME COURT OF INDIA) C. Liability under Central Excise and Service Tax Process .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

required to charge duty of excise. The goods must be used in manufacturing process by 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 as any process amounting to manufacture or production of goods is covered by Negative list. Process does not amount to manufacture:Where the processing undertaken by the job worker does not amount to manufactu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r duty wholly exempt . It means that if the duty is charged on final product by principal manufacturer, there is no liability on job worker to charge service tax. On the contrary, if appropriate duty is not paid by principal manufacturer, the job worker would be liable to charge service tax. D. Valuation Prior to 2007 valuation of job work was as per the ratio of UJAGAR PRINTS ETC. Versus UNION OF INDIA & OTHERS 1989 (1) TMI 124 - SUPREME COURT OF INDIA It was held by Supreme Court that in r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

provides for valuation as follows: Goods directly sold from job worker premise:Where the goods are sold by the raw material supplier/principal manufacturer from the factory of job worker - the value would have to be the transaction value of the goods so sold by the raw material supplier/principal. This will apply only when the raw material supplier and the buyer of the goods are not related and price is the sole consideration for the sale and the goods are sold for delivery at the time of remov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sold by the principal manufacturer at the time of removal of goods from the factory of job-worker, but are transferred to some other place from where the said goods are to be sold after their clearance from the factory of the job worker - the normal transaction value of such goods sold from such other place at or about the same time has to be adopted. This, in other words follows the principle of depot based valuation under Central Excise applicable where goods are cleared to depots of manufact .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

works contract, value would be arrived at as per options provided under Rule 2A of Service Tax (Determination of Value) Rules, 2006. 2. Provisions under CST/VATAct A. Interstate job work:The goods may be sent outside state for job work.In the absence of any sale, there would be no liability on principal manufacturer to charge CST. The material may be sent along with a declaration that the goods have been sent on job work. The work undertaken by job worker may or may not involve use of material. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

order, purchase order or contract should be clear on the values ascribed towards the material and labour. It is advisable to keep the valuation of each of the components in such bifurcated contract near to the reality. Composite Billing: In this case the value of material would be included in the total amount. This is called works contract. The material portion would be liable to CST. The various State governments have specified some deemed deduction for labour where the works contract or canno .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

od clearly to be service by the Court s by applying dominant motive test and consequently there is no liability to charge CST. B. Job work within state: Where principal manufacturer and job worker are located within same state, there would be no liability on principal manufacturer to charge VAT in the absence of sales. The liability charge VAT would be same as discussed above in case of interstate job works. 3. Applicability of GST on job work Having discussed the impact under Central Excise, Se .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eable to CGST/SGST in case of intra state job work and IGST, in case of inter- state job work. The job worker would be entitled to take the credit of tax charged by principal supplier. When the goods would be supplied back by job worker, he is also required to charge the tax in the same manner as charged by principal supplier. Following could be certain aspects which would be relevant under GST: Valuation: Supply of goods by principal supplier to job worker would be on account of other than sale .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d. Similarly, job worker may charge duty based on intrinsic value of goods in the form in which it is supplied by him after processing. This can be done based on the price at which supplied by principal supplier + his job work charges (including material and labour). Nature of taxes and credit: In case of job work within state, both principal supplier and job worker would be required to charge CGST and SGST. In case of inter-state movement, IGST would be charged. The tax charged by one party wou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ax to the extent material supplied by principal supplier. However, he has added certain material from his sources, there would be transfer of property in goods to that extent and this supply may be liable to additional tax of 1%. The tax so charged will not be admissible as credit to the principal supplier. Tax on supply of capital goods: There would be no distinction between capital goods and other goods in the GST regime. Hence, the supply of capital goods by principal supplier will also entai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version