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Scrap sales by job worker

KRISHAN KANT SONI (1 Points)

26 June 2021

Sir

If job worker sales scrap of job work by own invoice & value can be settle by credit note? please suggest

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9 Replies

veerendar singh (tax consultant) (3301 Points)
Replied 26 June 2021

You query cant be understood

Imthias ahamed Kormath (910 Points)
Replied 26 June 2021

Amentment invoice may issued along with debit/credit notes.

CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 27 June 2021

Please elaborate in details

Imthias ahamed Kormath (910 Points)
Replied 27 June 2021

If any rectification made by supplier.

Pankaj Rawat (GST Practitioner) (55030 Points)
Replied 27 June 2021

In term of Section 143(5) any waste & scrap generated during the Job work can be supplied as Under :
(a) If JW is registered, then it can be supplied by him from his own account on payment of GST applicable on said scrap.
(b) If JW is not registered, then waste & scrap generated during JW should be returned to principal or can supply from JW place on cover of Invoice issued by Principal.

But Question arises can JW can supply goods (scrap/waste) which are the property of Principal ????
So it is advisable that any supply of waste & scrap supply by JW or principal must be done by Agreement/Contract in writing before .

So in your case the issuance of credit note can be as per agreement between you & your principal.

1 Like

Imthias ahamed Kormath (910 Points)
Replied 27 June 2021

It is only a sale ,in the question.

Pankaj Rawat (GST Practitioner) (55030 Points)
Replied 27 June 2021

Dear Imthias
In GST it's supply of goods or services .
so if you refer above section mentioned , will get the reply to your confusion.

Imthias ahamed Kormath (910 Points)
Replied 29 June 2021

It is own invoice by j/w , not to the owner of goods or principal supplier.

Chirag Mehta (26 Points)
Replied 18 May 2022

We know scrap generated during job work can be sold either by principal or by Job worker(registered).

Scenario 1:
if job worker sells the scrap, keeps the entire consideration(as agreed) after paying GST then

1. Will principal have to pay GST on outward supply of scrap to job worker?

2. Job worker agrees to provide credit note to principal.
Is GST to be paid by principal on scrap component?

3. Job work charges are reduced to the extent of scrap value when consideration is with job worker.
Again, is GST to be paid by principal?

All in all how should valuation of job work charge be done wrt scrap. how to account for credit note.

=============
Scenario 2:
If principal sells scrap from Job worker site, collects the basic+gst then should he follow cost accounting principles and adjust cost of production.

Eg.

100/- Raw Material sent to JW
20/- worth RM went in Scrap.
80/- Effective RM in use

Job work charges 40/-
Scrap value salvaged 10(basic)+2(GST)/-

cost of goods returned
80+40-10 = 110

So is it ok to factor scrap value to units produced.

or should I show it under income from scrap in P&L.

Also, if entire consideration is with job worker then should I follow cost accounting to factor scrap value in cost of unit produced.