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Differential GST for jobwork

Rules 2022 views 1 replies

lamp

AGM

29 Points Joined September 2014

As a EMS vendor, We manufacture PCB Assemblies for various customer on Turnkey model , Where we procure the materials and provide the finished product to customer.

we have many request from customer to do differential billing of the Sales by bifurcating the job work cost and materials cost as the GST for jobwork is 6+6 and components is 18% , there by saving GST.

Example product sales is value 1000 and GST 180 Rs , Recomended billing pattern of customer is Materials cost is 800 GST will be 144/ and job work cost is 200 and GST is 24/ .

So a new saving of 12/

Is there any Rule / ACT / Notification which terms this transaction as fraud and punishable so i can convince the customer on thsi

Replies (1)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9434 Points Joined December 2011

The GST treatment depends on whether the supply is treated as a composite supply or if the components and job workd are considered separately.

Composite Supply : If the contract is for a turnkey project where you supply the finished PCB Asemblies, it might be considered a coposite supply. In such a case, the GST rate applicable would generally be based on the principal supply.

Differential Billing for GST Savings: The practice of bifurcating costs into job work (GST @ 12%) and materials (GST @ 18%) to save GST is not explicity allowed or dsallowed in the GST law based on the information given. However, the GST law does specify.That for a compoiste supply, the tax rate applicable is that of the principal supply.

To convince the customer: You should check the specific GST rates applicable to PCB Assemblies and ensure compliance with GST LAWS regarding classification and billing.