Semblance of stability

Mohan Lavi | Updated on April 03, 2018

What CBIC circular on GST for job work means

In the nine months since GST went live, the Central Board of Indirect Tax and Customs (CBIC) has issued 310 notifications, 68 circulars and 13 orders on different aspects of the tax law. That’s an average of 43 a month, or more than one a day.

Recently, the CBIC issued a circular (No 38/12/2018 dated March 26, 2018) clarifying six important issues relating to ‘job work’ (that’s work on raw materials or semi-finished goods supplied by a principal manufacturer). The circular clarifies that, in addition to the goods received from the ‘principal’, the ‘job worker’ can use his own goods for providing the services of job work.

It goes on to clarify that a job worker is required to obtain registration only in cases where his aggregate turnover, to be computed on all India basis, in a financial year exceeds the threshold limit regardless of whether the principal and the job worker are located in the same State or in different States. It also clarifies that the supply of goods by the principal from the place of business / premises of the job worker to the principal’s customer will be regarded as supply by the principal and not by the job worker.

The circular uses a lot of words to clarify six instances of movement of goods from the principal to the job worker and the documents and intimation required in those instances — where goods are sent by principal to only one job worker; where goods are sent from one job worker to another; where the goods are returned to the principal by the job worker; where the goods are sent directly by the supplier to the job worker; and where goods are returned in piecemeal by the job worker.

The circular also provides useful clarifications on the liability to issue invoice, determination of place of supply and payment of GST.

The circular ends rather timidly by clarifying that input tax credit would be available to the principal, irrespective of the fact that whether the inputs or capital goods are received by the principal and then sent to the job worker for processing or whether they are directly received at the job worker’s place of business/premises, without being brought to the premises of the principal.

It is also clarified that the job worker is also eligible to avail input tax credit on inputs, etc. used by him in supplying the job work services if he is registered. Though fairly comprehensive, the circular would have been complete had it clarified on the treatment of goods damaged at the premises of the job worker and when the job worker decides to purchase the goods himself.

Though the magical concept of matching of invoices through taxpayers’ returns hasn’t been implemented yet, the GST laws appear to be getting some semblance of stability. Circulars that provide some clarity such as the one related to job work will only add to the stabilisation of the laws.

CBIC should take a cue from the RBI and issue Master Circulars on important aspects of the GST law —namely, invoices, e-way bills, returns, job work, input tax credit and taxation of e-commerce operators.

These Master Circulars would be reviewed annually and would be amended only if there are significant changes to the law; this could also restrict the number of notifications being issued.

The writer is a chartered accountant

Published on April 03, 2018

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