Exporters are hopeful that the Goods and Services Tax (GST) Council will decide in favour of bringing about a uniform rate of GST on job work for all sectors and pare it down to either 5 per cent or nil.

“The GST rate on job work for the textile and chemicals sector is 5 per cent while for all others it is 18 per cent. This leads to a lot of classification disputes. We hope it will be sorted out in the GST Council meeting this week,” said Ajay Sahai, Director-General, FIEO.

The GST Council, headed by Finance Minister Arun Jaitley, is scheduled to meet in Guwahati on November 10 to discuss lingering problems faced by businesses.

Job work basically is adding value to raw materials or semi-processed goods supplied by the principal manufacturer. It could include processes such as sorting, washing, welding, spinning, dyeing and tanning.

Different rates of GST on job work have created confusion as manufacturers were struggling to get their items classified into categories which attracted lower GST.

“Already classification disputes are taking place on whether a process is chemical or non-chemical as the rates for the two processes differ,” Sahai said.

He added that the government was anyway not getting any tax in case of job work as it is just a movement of credit from supplier to job worker or reverse. Single GST rate will help towards classification dispute.

While a solution to the problem would be to bring down GST on job work to 5 per cent for all sectors, many textile organisations are demanding a zero per cent rate.

According to the Karnataka Small Scale Industries Association, most of the job workers were illiterate and it would be very difficult for them to handle the paper work involved.

The GST Council is also expected to discuss the possibility of bringing down rates on some labour intensive sectors including leather and handicrafts.

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