CBIC issued a clarification on Job work vide circular No. 126/45/2019- GST on the dated 22nd November 2019. People had many doubts about job work and manufacturing processes.
Let's see the before and after scenario:
Per notification No. 11 dated June 28, 2017, S. no. 26, details of GST rates to be charged on manufacturing services on physical inputs (goods) owned by others have been provided. The notification has been amended by notification no.20/ 2019 dated September 30th, 2019. The combined notifications now read as under:
GST onmanufacturing services on physical inputs (goods) owned by others:
(id) Services by way of job work other than specific entry: CGST @ 6%
(iv) Manufacturing services on physical inputs (goods) owned by others other than specifically specified: CGST @9%
Per the above notification, Job work services (other than specified specifically), will be subjected to GST @12% (except service considered as manufacturing services which are liable @18%).
People had a view that if any service provided on goods owned by others and the service not considered as manufacturing services (not changed the name, character, and use of the goods) liable @12%.
Per the CGST Act, 2017, '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.'
Per the circular issued by CBIC, a Registered person is a clear demarcation between the scope of the entries at item (id) and item (iv) under heading 9988 of Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017.
On the above basis, if any service provided by way of treatment or processing undertaken by a person on goods belonging to another registered person will be considered under the Job work service and liable @12%.
It means any service provided to Non registered person by way of treatment or processing will be covered under manufacturing service and liable @18%.
Conclusion: If any service is provided to the registered person it will be covered under Job work service, and if it is provided to an unregistered person, it will be covered under manufacturing service.