GST Complaince_in Deduction of amount of Contractor, Goods and Services Tax - GST

[Prem Choudhary]

Dear Expert

please advice in following in relation to

Scenario:- The ABC Cement Compnay was entered Contract for fabrication works (Mechanical ) under service Contract. In Contract, material (Steel) has been issued by ABC to Contractor for fabrication. After completion of work ,in material reconciliation of Steel, shortage has been found and ABC has decided to debit the vendor of shortage of Steel ( as penalty) .

Issue:-In above Scenario, Since the material(Steel) is part of ABC and steel was not supplied by Contrator :-

• Whether GST Credit Note can raise by Contractor ? or

• ABC should issue Tax Invoice with @18% of GST , Considering supply as per Schedule –II Point-5(e)

please advice above issue

Posts / Replies

[KASTURI SETHI]

Goods found short are to be treated as goods supplied/sold. Tax invoice is to be issued.

[Prem Choudhary]

Sir

In the continuation of above Scenario, the ABC is eligible to take ITC for Steel used in fabrication, one more point is that:-

Whether ABC need to reverse ITC for shortage steel for Debit to Contractor instead of issuing Tax invoice. but in this case, Since Steel is supply by other vendor contractor can not get benefit of GST.

please advice which option is best for compliance of GST.

[KASTURI SETHI]

In my view, tax invoice is to be resorted to. Goods found short at the hands of contractor. In other words, goods sent for fabrication (job work) have not been received back. Responsibility is cast upon ABC. It will be presumed that goods stand sold/supplied.

[Ganeshan Kalyani]

Need to see if section 15 (2)(b) which states as "any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;" is applicable in thi case or not.

[KASTURI SETHI]

Dear Sh Ganeshan Kalyani Ji,. Not applicable as inputs sent for job work have been short. Here is no question of inclusion or exclusion.

[Mahadev R]

Can we interpret in following way?

1. Good were sent for job work for processing and if such goods are not received within stipulated time of 1 year, then such movement is deemed as supply.

2. ABC can issue the invoice and charge the job worker / contractor with GST + interest which is payable for non -receipt within a year.

3. If this is happening before completion of 1 year, then pay GST as tolerance of act of job worker and do not reverse any credit (ABC) as inputs are used for taxable supplies.

[KASTURI SETHI]

Dear Sh.Mahadev R. Ji, Yes I agree with you. This was brewing in my mind.