GST update on JOB WORK IN GST ON TEXTILE INDUSTRY

Current Scenario:-
Under the existing provisions of service tax, there is a conditional exemption in job work. If the process undertaken by job worker falls in the definition of manufacture then no service tax is leviable. This exemption is given under Notification 25/2012-ST at entry no. 30 (c). In context of textile industry, presently neither excise duty nor service tax is leviable. Since there is no tax liability, credit is also not allowed.
Further, no duty is leviable under Central Excise law also by virtue of Notification no. 30/2004-CE. Thus, as of now, neither Central Excise Duty nor service tax is leviable on textiles.
GST Regime:-
In GST regime, the above said service tax exemption has been withdrawn. Thus, there is no exemption to the job work in any case. Further, job work is considered as service under Schedule II of the CGST Act, 2017. Hence, the GST will be applicable on job work treating as service. Also, in case of job work of textiles, initially the rate of tax was kept at 18%, which has been reduced to 5% in the GST Council meeting held on 11/06/2017. This rate of 5% has been prescribed along with admissibility of credit.
Section 543) of the CGST Act states that if the rate of outward supply is lower than rate of inward supply, then refund of accumulated credit will be allowed. However, while prescribing the rate of tax as 5% on supply of fabric by a trader, a condition has been inserted that no refund of accumulated credit will be allowed. Thus, as of now, if some trader sells the fabric, rate of tax will be 5%; but refund of accumulated credit will not be allowed. On the other hand, there is no such condition with the rate of tax on job work of fabric/textile. In both the case, the rate of tax is the same, i.e. 5% only.
It is worthwhile to mention here that the raw material or consumables used in textile manufacture such as colour, chemicals, etc. are chargeable to tax @ 18% while output will suffer the tax @ 5% only. Therefore, since there is restriction of non-admissibility of credit to the trader only, the job worker will get the refund of credit so accumulated. Therefore, it is interpreted that dealers of textiles will send the material for job work only. By doing this, the tax implication will be the same but the refund of overflow of credit will be available as there is no specific denial like that in the case of supply of textiles.

You can visit us at www.capradeepjain.com and also at www. https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/…

Comments

GST update on JOB WORK IN GST ON TEXTILE INDUSTRY

Post a Comment

Query