GST UPDATE ON CHANGE IN RATE FOR JOB WORK SERVICES-INCREASING COMPLEXITIES

GST UPDATE ON CHANGE IN RATE FOR JOB WORK SERVICES-INCREASING COMPLEXITIES:-
The government issued Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019 wherein GST rates have been specified for certain types of job work. The amendments made in the serial no. 26 of the principal notification no. 11/2017-Central Tax dated 28.06.2017 is highlighted for the sake of easy identification as follows:-

*S. No.*	*Chapter, Section or Heading*	*Description of service*	*Rate (per cent.)*	*Condition*
*(1)*	*(2)*	*(3)*	*(4)*	*(5)*
26	Heading 9988 (Manufacturing services on physical inputs (goods) owned by others)	(i) Services by way of job work in relation to- (a) Printing of newspapers; [(b) Textiles and textile products falling under Chapter 50 to 63 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975)]55; [(c) all products *other than diamondsfalling under Chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975);]56 (d) Printing of books (including Braille books), journals and periodicals; [(da) printing of all goods falling under Chapter 48 or 49, which attract CGST @ 2.5per cent. or Nil]57 (e) Processing of hides, skins and leather falling under Chapter 41 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975). [(ea) manufacture of leather goods or foot wear falling under Chapter 42 or 64 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975) respectively;] 58 [(f) all food and food products falling under Chapters 1 to 22 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975); (g) all products falling under Chapter 23 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975), except dog and cat food put up for retail sale falling under tariff item 23091000 of the said Chapter; (h) manufacture of clay bricks falling under tariff item 69010010 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975);]59 [(i) manufacture of handicraft goods. Explanation.- The expression “handicraft goods” shall have the same meaning as assigned to it in the notification No. 32/2017 -Central Tax, dated the 15th September, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 1158 (E), dated the 15th September, 2017 as amended from time to time.] 60 [***]61	2.5	-
		[(ia)Services by way of job work in relation to- (a) manufacture of umbrella; (b) printing of all goods falling under Chapter 48 or 49, which attract CGST @ 6 per cent	6	-]⁶²
		(ib) Services by way of job work in relation to diamonds falling under chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975);	0.75	-
		(ic) Services by way of job work in relation to bus body building;	9	-
		(id) Services by way of job work other than (i), (ia), (ib) and (ic) above;	6	-
		[(ii) Services by way of any treatment or process on goods belonging to another person, in relation to- (a) printing of newspapers; (b) printing of books (including Braille books), journals and periodicals {(c) printing of all goods falling under Chapter 48 or 49, which attract CGST @ 2.5 per cent. or Nil.}63	2.5	-]⁶⁴
		[(iia) Services by way of any treatment or process on goods belonging to another person, in relation to printing of all goods falling under Chapter 48 or 49, which attract CGST @ 6per cent.	6	-]⁶⁵
		[[(iii) Tailoring services.	2.5	-]⁶⁶]⁶⁷
		[(iv) Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ib), (ic), (id), (ii), (iia) and (iii) above	9	-]⁶⁸

Before analysing the impact of amendments made in the above cited serial no. 26, we first discuss certain terms which will be useful in arriving at correct conclusion.
According to section 2(68) of the CGST Act, 2017 “job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly.

According to section 2 (72) of the CGST Act, 2017 “manufacture” means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term “manufacturer” shall be construed accordingly.

Now, from the above definitions, one may interpret that job work is process/treatment taken on goods belonging to others and such process may or may not amount to manufacture. However, if the above serial no. 26 is pursued, it is found that there are specific GST rates on certain job work in relation to manufacture such as manufacture of leather goods or foot wear attracts GST rate of 5%, job work in relation to manufacture of handicraft goods attracts GST rate of 5%. At the same time, it is found that there is one entry (iv) according to which manufacturing services on physical inputs (goods) owned by others, other than all the entries specified in serial no. 26 attracts GST rate of 18%. It is pertinent to mention that the amendment inserts new entry (id) which is residual entry which states that services by way of job work other than (i), (ia), (ib) and (ic) attracts GST rate of 12%. On simultaneous reading of entry (id) and (iv), it is observed that if job work is in the nature of manufacturing services on goods belonging to others except all other entries including (id), then GST rate of 18% will be applicable. Consequently, this notification seeks to distinguish between the job work services resulting in manufacture and prescribes higher GST rate on the same. This will lead to raising new dispute that whether the job work process is manufacturing service or not? Moreover, the term “manufacturing services” is not defined anywhere in the notification. If we consider the meaning of manufacture given in the CGST Act, 2017, we can conclude that any job work process which results in emergence of new product having distinct name and character will be covered by the specific entry (iv) of the serial no. 26 of the notification according to the principle that “SPECIFIC PREVAILS OVER GENERAL”. However, one may also interpret that the manufacturing services means the job work pertaining to manufacture of goods. Say for example- If steel wire is being sent to job work for making steel rollers then we can infer that the said job work results in emergence of new distinct product and tantamount to manufacturing services thereby liable to GST at the rate of 18%. However, if hot rolled patta patti is being sent for cold rolling then such job work will not result in emergence of new distinct product and it can be said that it will get covered under entry no. (id) of the serial no. 26 of the notification and will attract 12% GST rate. Hence, the amendment has lead to creating confusion in the minds of assessee as regards the applicable entry (id)/(iv) and applicable GST rate as it can be contended that the process undertaken on job work does not amount to manufacturing services which will have to be determined on case to case basis.
Moreover, the GST paid by job worker will be credited in electronic credit ledger of supplier, hence the complete exercise is revenue neutral. Hence, the logic behind lowering of rate on job work charges is beyond imagination.

This is solely for the educational purpose.
You can reach us at www.capradeepjain.com, at our facebook page on
https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/ as well as follow us on Twitter at https://www.twitter.com/@capradeepjain21

Comments

GST UPDATE ON CHANGE IN RATE FOR JOB WORK SERVICES-INCREASING COMPLEXITIES

Post a Comment

Query