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GST Update on Threshold Exemption Provided To Job Workers

GST Update on Threshold Exemption Provided To Job Workers

As per provisions of Sec 24(1) of CGST Act, “a person making inter-state supply shall be liable to compulsorily registered himself under GST regime”. In other words, he is not eligible for threshold exemption of Rs. 20 lacs (Rs. 10 lacs in special category states except J & K) and is liable for registration right from the beginning. 

But the GST Council, in its 21st meeting held at Hyderabad on 09.09.2017has decided to exempt those job workers from obtaining registration who are making inter-State taxable supply of job work. However, this supply should be made to a registered person and the movement of goods should be under the cover of an e-way bill, irrespective of the value of the consignment. This exemption will not be available to job work in relation to jewellery, goldsmiths’ and silversmiths’ wares as covered under Chapter 71 which do not require e-way bill. 
The effect of this declaration is as follows:-
• The job worker making inter-state supplies will be unregistered due to threshold; the liability to pay tax under reverse charge under section 9(4) of CGST Act, 2017 will be on the principal supplier of material.

• The e-way bills have been notified vide notification 27/2017-CT dt. 30th August, 2017. These rules state that any person who causes movement of goods of consignment value exceeding fifty thousand rupees shall be liable to generate e-way bill. However, if the amount of consignment is less than this amount, there is option to generate e-way bill. If the job worker intends to claim the exemption, it shall have to be ensured that the e-way bill is generated in each and every movement by the registered principal supplier or transporter. If it is not done, the job worker (inspite of being an unregistered person) shall have to generate the e-way bill on common portal if he intends to claim the exemption.

• Further, the government has not yet notified the date for the applicability of E-way bill provisions till date. Now, the said decisions of GST council on threshold limit applicable to job worker, will definitely lead to disputes as to whether the job worker making inter-state supply has to compulsorily register himself till the applicability of E-way bill. Or, if the said job workers are already registered, they shall have to continue the registration till the provisions of e-way bill come into force.

• Also, what will be the consequences if the job worker making inter-state supply has not yet registered himself due to confusion. Whether the inter-state supplies made from 1.7.2017 till date will be leviable to tax or the notification yet to come will have provision for this case too.

It is hoped that the ambiguities pertaining to the above referred decisions will be clarified soon.
 

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