GST – Job Work
Service by way of job work in relation to textile processing house is covered under entry 13A of G.S.T. (Services) rate and is taxable @ 5% with full ITC.
In Mumbai, Bhiwandi, Dombivali and Ichhalkaranji there are various process houses doing this job of processing of textile fabrics and this service was exempted in BST and VAT era and it appears that now it will be taxable @ 5% with full ITC under entry 13A.
Till today there was no hard and fast rule for consignment of fabrics (Grey or processed) and dealers were maintaining the records as per their convenience.
Now it appears that some guidelines are issued for keeping the record which is as under.
It is said that the owner of fabrics while sending goods for processing shall charge 5% GST to the processors on the value of textile fabrics and the processors shall claim the same as input credit.
After completing the job of processing at the time of delivery of processed fabrics shall be again charge of 5% GST on the value of fabrics plus his process charges which are together shall be claimed as input credit by the textile traders.
I personally feel it is our intra state transfer of goods like sending goods to consignment agent for sale who collects the full tax and the same is exempted for intra state only. While sending the fabrics back the processor should charge 5% GST only on his process charges and claims input credit on the packing materials and processing materials like chemicals purchased. Similarly large manufactures are keeping their goods for sales in the godown of agents like Amazon who sells goods on on-line orders, can be liable for tax for supply to Amazon. Kindly help.
Under GST there are various changes as compared to earlier VAT era. Still various clarifications are coming. Meanwhile the position of given facts can be analyzed as under:
The job work is defined in section 2(68) of CGST Act as under:
“(68) “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;”
Thus, if the goods for job work are supplied by registered person to job worker for processing, it will be job work.
The further procedures for job work are already section 143. The said section is as under:-
“143. (1) A registered person (hereafter in this section referred to as the “principal”) may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall,––
(a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out, to any of his place of business, without payment of tax;
(b) supply such inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out from the place of business of a job worker on payment of tax within India, or with or without payment of tax for export, as the case may be:
Provided that the principal shall not supply the goods from the place of business of a job worker in accordance with the provisions of this clause unless the said principal declares the place of business of the job worker as his additional place of business except in a case —
(i) where the job worker is registered under section 25; or
(ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner.
(2) The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal.
(3) Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of one year of their being sent out, it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out.
(4) Where the capital goods, other than moulds and dies, jigs and fixtures, or tools, sent for job work are not received back by the principal in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of three years of their being sent out, it shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out.
(5) Notwithstanding anything contained in sub-sections (1) and (2), any waste and scrap generated during the job work may be supplied by the job worker directly from his place of business on payment of tax, if such job worker is registered, or by the principal, if the job worker is not registered.
Explanation.–– For the purposes of job work, input includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or the job worker.”
Thus, it is very clear under section 143(1) that goods supplied to job worker will not be liable to GST. Correspondingly, the return of processed goods will also not be liable to GST. However, the conditions are to be followed give in section.
Therefore, job worker should charge GST only on its processing charges.
Since there is no prohibition about ITC the job worker will be entitled to ITC on its inward supply.
So far transaction between principal and agent is concerned in entry (3) of Schedule I to definition of ‘supply’ under section 7 provides as under:
“3. Supply of goods-
a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
b) by an agent to his principal where the agent undertake to receive such goods on behalf of the principal.”
Therefore if principal supplies goods to agent for sale by him on its behalf then it will be deemed to be supply by principal to agent. From facts given in the query the position appears that Amazon is agent of supplier of goods. Therefore supplier of goods to Amazon GST will be required to be paid when supplier of goods delivers the goods to Amazon.