Goods sent for Job work, Goods and Services Tax - GST

[Dinesh Mehta]

We (the principal) have sent raw material for processing to job worker. Due to some dispute the job worker neither returned the goods after processing nor did he return the raw material back within the time frame of 1 year. In such as scenario where the inputs are not returned to the principal within the time stipulated in section 143, it shall be deemed that such inputs or capital goods had been supplied by the principal to the job worker on the day when the said inputs were sent out and the said supply shall be declared in FORM GSTR-1 and the principal shall be liable to pay the tax along with applicable interest.

If the principal pays GST on the same after 1 year with interest @18% should he raise Invoice for the same to the job worker? In GSTR 1 should it be shown as Invoice for the month in which inputs were sent or the month in which default has been made?

Can the job worker claim ITC of the same?

Posts / Replies

[ABHISHEK TRIPATHI]

It has been clarified vide Circular No. 38/12/2018 that the principal would issue an invoice for the same and declare such supplies in his return for that particular month in which the time period has expired. So, it seems that the invoice should be for the month of default. If the return is declared for the defaulting month then the invoice has to be raised in that month only (logically it seems).

Job worker may get ITC if satisfies Section 16 of the CGST Act. Why would the job worker anyway be eligible? Is he using those inputs in the course and furtherance of his business?

Relevant paragraph of the above-stated circular:

Para 9.6 Thus, if the inputs or capital goods are neither returned nor supplied from the job worker’s place of business / premises within the specified time period, the principal would issue an invoice for the same and declare such supplies in his return for that particular month in which the time period of one year / three years has expired. The date of supply shall be the date on which such inputs or capital goods were initially sent to the job worker and interest for the intervening period shall also be payable on the tax. If such goods are returned by the job worker after the stipulated time period, the same would be treated as a supply by the job worker to the principal and the job worker would be liable to pay GST if he is liable for registration in accordance with the provisions contained in the CGST Act read with the rules made thereunder. Further, there is no requirement of either returning back or supplying the goods from the job worker’s place of business/premises as far as moulds and dies, jigs and fixtures, or tools are concerned.

[KASTURI SETHI]

Sh.Dinesh Mehta Ji,

Board's circular no.38/12/2018-GST dated 26.3.2018 has been amended vide Circular No. 88/07/2019-GST, dated 1-2-2019. The amended para no.3 strengthens the views of Sh.Abhishek Tirpathi, Sir. This para is extracted below:-

"4.4 Amended Para 3.

It may be noted that the responsibility of keeping proper accounts of the inputs and capital goods sent for job work lies with the principal. Moreover, if the time frame specified under section 143 for bringing back or further supplying the inputs / capital goods is not adhered to, the activity of sending the goods for job work shall be deemed to be a supply by the principal on the day when the said inputs / capital goods were sent out by him. Thus, essentially, sending goods for job work is not a supply as such, but it acquires the character of supply only when the inputs/capital goods sent for job work are neither received back by the principal nor supplied further by the principal from the place of business / premises of the job worker within the specified time period (under section 143) of being sent out. It may be noted that the responsibility for sending the goods for job work as well as bringing them back or supplying them has been cast on the principal."

[Shilpi Jain]

The principal can issue invoice now for the goods that have not been received within the time limit. Since it is deemed that hte supply has been made on the day when the goods were sent out, interest will be attracted.

The job worker should be eligible to take credit now as the invoice will be of the present date.

[Ganeshan Kalyani]

The job worker can claim ITC of the invoice only when he makes payment towards that invoice within 180 days.

[Himansu Sekhar]

This is important

[Shilpi Jain]

Payment can be made by way of set-off of payables and receivables between the principal and the JW. So I dont think this should be a big issue here as the principal issues invoice and then the JW also issues invoice