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TMI BlogGST on scrap sales credit note by job workerX X X X Extracts X X X X X X X X Extracts X X X X ..... Sir, We are sending the semi finished goods for machining to job worker. After machining the job worker sends the finished goods to us. The swarf / borings generated out of machining is being sold by the job worker on payment of applicable GST. The job worker issues us the credit note for the material value sold by them on our behalf. In this context I request your valuable opinion whether the GST applicable on credit note issued by the job worker for the material value. Regards K Srinivasan - Reply By ANITA BHADRA - The Reply = Sir , In terms of Section 143(5) of CGST Act 2017 - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... job worker is registered, or by the principal, if the job worker is not registered In case your job worker is registered , sale of scrap will be treated as supply by job worker . In case , he is unregistered , sale of scrap will be treated as your supply . In my opinion , Both the cases , GST is not applicable on credit note by job worker . Experts view are requested on this issue Regards - Reply By Rajagopalan Ranganathan - The Reply = Sir, You would have taken credit of tax paid on raw materials used in the manufacture of the semi finished goods. If you send the semi finished goods on payment of tax, the tax paid by you will be taken as credit by the job worker. The job worker can utilize this credit for payment of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on the scrap sold by him. Therefore he will issue a credit note only to the value of scrap sold by him. Therefore, in my opinion, no tax liability will arise on such credit note. - Reply By CS SANJAY MALHOTRA - The Reply = Credit note is issued in terms of section 34 of CGST act in reference to invoice issued on account of supply. Credit note may be on account of sales return, discount, etc. If job workers issues credit note, same will be against what ??? Against his job charges, not possible in present scenario. Job worker has retained money from scrap sales, if he has been authorised to make scrap sale. No need of credit note as the basic amount excluding GST can be set off against job charges receivables due. The same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated at par with payment made by principal to jobworker. Alternatively you can raise supply invoice to job worker for supply of waste of payment of gst. practically think of entries from return perspective, impact of debit / credit note will be on your sales which may not get reconciled with sales in balance sheet. As already shared by friends, no GST but take practical view from all aspects. - Reply By K.Srinivasan Kuppuswamy - The Reply = Sir We are sending raw castings for machining After machining the borings(waste) cleared by job worker directly to the scrap vendor on payment of applicable Gst The job worker issues credit note to the principal for the scrap material value Since already GST suffered by way of invoic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from job worker to scrap dealer, credit note issued by job worker to principle for scrap material value will attract Gst Regards K.Srinivasan - Reply By CS SANJAY MALHOTRA - The Reply = You have to raise invoice for supply of material with GST which job worker will accept in his return. If job worker raises credit note with GST, the same will reduce his tax liability in return. Then he has to raise the same against his conversion charges invoice only. Your acceptance further to credit note of job worker indicates that you have debited the duty in your return. Now call depends on you as in both above scenario, duty liability on material part indirectly will come on you finally. - Reply By K.Srinivasan Kuppuswamy - The Reply = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sir, We are sending the semi finished goods for machining to job worker under job worker procedure i.e under delivery challan.. After machining the job worker sends the finished goods to us and raise service invoice on us with GST for job charges. . The swarf / borings generated out of machining is being sold by the job worker on payment of applicable GST to the scrap vendor The job worker issues us the credit note on us for the material value only without gst since already GST charged by him while removing.. That credit will attract GST or not. I request your valuable opinion whether the GST applicable. Regards K Srinivasan - Reply By Ramaswamy S - The Reply = The job work charges can be negotiated with the job worker for the net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantity and the job worker sells the scrap arising during the course of job work. The job worker pays the GST on the scrap sold by him. This will reduce unnecessary paper work and complications. Regards S.Ramaswamy - Reply By Ganeshan Kalyani - The Reply = In my view, the job worker need not issue credit note for scrap sold by him. If even if does then in my view there is not tax applicable on such credit note. Or otherwise , as suggested by Sri Ramaswamy Sir, negotiate the job worker. - Reply By Nikhil Oltikar - The Reply = In reply no: 7, Mr. S Ramaswamy points out that the job-working charges can be negotiated with the job-worker as he is retaining the scrap sale proceeds. I would like to ask if this violates the rule of valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of job-work? Thank you all for the valuable insights - Reply By Ramaswamy S - The Reply = It does not violate any provisions of the law. For the sake of clarity - If the goods are supplied by the recipient to the supplier for manufacturing/ providing service, the same shall be included in the value of goods/ services as additional consideration. However in this case, the goods supplied is not for providing the service but it is the residue/ remnants. If the scrap is not returned, then the recipient of the service shall debit the amount to the extent of the scrap +GST (due to the shortage in the quantity) which shall be available as credit at your end. The same cannot be termed as Additional Consideration. Therefore, the price ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be negotiated within the frame work. Regards S.Ramaswamy - Reply By Nikhil Oltikar - The Reply = Thank you very much for your reply Mr. Ramaswamy. From your reply, I understand as follows:- If the waste/scrap of job-work is retained by the job-worker and the job-worker retains the proceeds of sale of this waste/scrap(upon payment of GST), the labour charges for the job-work can be so negotiated. Because the job-worker is retaining the scrap sale proceeds(upon payment of GST), there is no need to add the value of the scrap to the job-working charges in the invoice of the job-work to the principal. Since GST is paid on the sale of waste/scrap and on job-working charges, the job-working charges so mentioned on the invoice are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot incorrectly valued. Thanks - GST on scrap sales credit note by job worker - Query Started By: - K.Srinivasan Kuppuswamy Dated:- 27-11-2017 Goods and Services Tax - GST - Got 11 Replies - GST - Discussion Forum - Knowledge Sharing, reply post by an expert, personal opinion Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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