Impact of Goods and Services Tax on Job Work – Part II

Transitional Provisions of Goods and Services Tax on Job Work and Other Related Manufacturing Activities

In our previous article we discussed about the implication of Goods and Services Tax on Job Workers and the tax liability of principal. To continue it further, we are putting all the conditions that you must keep yourself aware during transition. These are the scenario when, as a manufacturer/ principal you have sent goods for job work under current tax regime and receiving it under GST regime.

Impact of Goods and Services Tax on Job Work
Impact of Goods and Services Tax on Job Work

Raw Material/ Inputs Removed for Job Work and Returned on or after GST Roll-Out

Where goods have been removed from a factory for further processing to a job worker prior to the GST applicable date, i.e. goods were removed under current tax regime however received back after GST roll-out;

  • No tax shall be payable if such inputs are returned to the said factory within six months from the GST applicable date;
  • Time limit of six months can be increased by government on the basis of a reasonable cause from manufacturer’s end. However such time limit will not be more than two months in excess of six months from GST applicable date. In other words, this can be extended to a maximum time limit of eight months from GST applicable date;
  • Tax shall be payable by the job worker if such inputs are liable for Goods and Services Tax under the  new tax regime, and are returned after a period of six months or the extended period as mentioned above;
  • Tax shall be payable by the manufacturer if such inputs are liable for GST and are not returned within a period of six months or the extended period;
  • Input credit shall be allowed only when the manufacturer and the job worker declare the detail of such inputs held in stock in the last return under the current regime.

Similarly in case of Semi-finished or Finished goods, a job worker is not required to pay tax under GST, if such goods are returned to original manufacturer’s place of business within a period of 6 months from the GST applicable date.

Click Here to read further on the taxation provisions on job work under current tax regime and corresponding law under GST law.

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