what should be the gst rate for job work charges
and whether any reverse charge mechanism applicable or not
A manufacturer may send out his goods to a job worker for initial process, intermediate process, assembly, packing or any other completion process and later supply such goods to its customers or use in any other manufacturing process accompanied by its own. The goods sent for job work maybe raw material, component parts, semi-finished goods and even finished goods. The resultant goods could be with same characteristics or with variation of the product send for job work
Procedure and compliance under GST
A. Goods send out for job work must be accompanied with a challan
B. Goods send must be received back by the principal within the period mentioned below:
- Inputs, semi-finished or finished goods- 1 year
- Capital Goods- 3 years
Of being send out by the principal to the job worker
C. In case where the goods send have not been received back within the period as mentioned above, such goods will be treated as supplied to the job worker by the principal.
Further tax will be required to be paid by the principal on such deemed supply.
D. Principal may on his own will
- Receive back the goods after processing from job worker
- Supply to his customers from the place of business of job worker
Under both the situations ITC paid on purchase of goods send on job work will be allowed to the principal.
E. Waste and scrap generated during the initial process, intermediate process, assembly, packing or any other completion process may be sold on payment of tax by:
- Job worker- if he holds a registration
- Principal- if job worker does not hold a registration
Transition provisions
In case any inputs or semi-finished goods had been removed before the appointed date from the factory of the manufacturer and sent to a job worker for carrying further processing, testing, repair or for a similar purpose, and the same is received on or after the appointed date, no tax shall be payable if the following conditions are satisfied:
- Underlying goods are returned to the factory within 6 months from the appointed date (extendable for a maximum period of 2 months).
- Declaration of the goods held by job worker is done in specified form and manner
- Supply of semi-finished goods or finished goods is done only on payment of tax in India or the goods are exported out of India within 6 months from the appointed date (extendable by not more than 2 months).
If the underlying inputs, semi-finished goods or finished goods are not returned within 6 months or extended period, ITC availed earlier under existing laws will be recovered
Source:ClearTax
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