ITC to job worker

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INPUT ELIGIBILITY TO JOB WORKER

The provision related to job worker as to admissibility of input tax are contained in sec 20 of the act and same is reproduced below:

(1) The “principal” referred to in section 55 shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on inputs sent to a job-worker for job-work.

(2) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the “principal” shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job-work without their being first brought to his place of business.

(3) Where the inputs sent for job-work are not received back by the “principal” after completion of job-work or otherwise or are not supplied from the place of business of the job worker in accordance with clause (b) of sub-section (1) of section 55 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:

PROVIDED that where the inputs are sent directly to a job worker, the period of one year shall be counted from the date of receipt of inputs by the job worker.

(4) The “principal” shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on capital goods sent to a job-worker for job-work.

(5) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the “principal” shall be entitled to take credit of input tax on capital goods even if the capital goods are directly sent to a job worker for job-work without their being first brought to his place of business.

(6) Where the capital goods sent for job-work are not received back by the “principal” 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:

PROVIDED that where the capital goods are sent directly to a job worker, the period of three years shall be counted from the date of receipt of capital goods by the job worker.

(7) Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies, jigs and fixtures, or tools sent out to a job-worker for job-work.

Issue

Issue 1: Eligibility of Input Tax to the principle:

In terms of section 20(1) and 20(2) of the revised model GST law the principal is eligible to avail the input tax credit on inputs sent to job worker for job work.
Principle shall also be eligible for input tax even in those cases where goods are directly sent to job worker from supplier without being received by the principle taxable person.

However, principle taxable person shall not be eligible for input tax in respect of services directly received by the job worker or provided through such taxable person.

Time period within which the inputs sent for job work has to be received back by the principal?

In case supplied through principle taxable person – One year from the date of being sent out.
In case inputs directly received by the taxable person – One year from the date of receipt of goods by the job worker

What if in case goods are not received within one year:

  1. Principle taxable person supplier shall have to reverse the credit originally availed by him.
  2. Such belated return shall be deemed to be supplies retrospectively from the date when such inputs are supplied by the principle or as the case may be receipt by the job worker.
  3. Principle shall be liable to pay tax interest on such deemed supplies.

What is the time period within which the capital goods sent for job work has to be received back by the principal?

Three years.

What is the liability of the principal if the capital goods sent to job worker have not been received within 2 years from the date of being sent?

Principal has to pay an amount equal to credit takenon such capital goods along with interest.

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