SECTION 16A INPUT TAX CREDIT IN RESPECT OF INPUTS SENT FOR JOB WORK

GST Update 02.07.2016

GST DAILY DOSE OF UPDATION:-

SECTION 16A INPUT TAX CREDIT IN RESPECT OF INPUTS SENT FOR JOB WORK:-

The provisions of credit availment on inputs/capital goods sent to job work are similar to the provisions prevalent at force with slight variations. The principal manufacturer shall be entitled to take credit of input tax on inputs sent to a job-worker for job work if the inputs sent for job-work are received back by the principal manufacturer within a period of one hundred and eighty days of their being sent. Furthermore, the inputs may be directly sent to the premises of job worker and the time period of 180 days shall be counted from the date of receipt of inputs by the job worker. The principal may also sent capital goods to the job worker and in that case, the time limit for return of capital goods to the premises of principal manufacturer shall be 2 years.

It is further provided that where the inputs/capital goods are not received back by the principal within the prescribed time period, an amount equal to input tax credit availed on the said inputs/capital goods shall be paid along with interest. However, the principal may reclaim the input tax credit and interest paid earlier when the inputs/capital goods are received back by him at his place of business.

The following variations in the provisions are worth observing:-

·        Presently, there is provision to only reverse the cenvat credit taken by the principal manufacturer and to re-claim the cenvat credit on receipt of job worked goods. However, the proposed GST regime also makes the principal manufacturer to pay interest and to re-claim it when the job worked goods are received back by him. The inclusion of interest element seeks to unnecessary complicate the situation as there is no revenue loss to the government.

·        Furthermore, presently there is also provision of sending the goods from one job worker to another job worker and even in such cases, cenvat credit is available to the principal manufacturer. However, there is no express provision similar to this in the proposed GST regime.

·        Moreover, presently there is express provision as regards admissibility of cenvat credit of jigs, fixtures, moulds and dies or tools falling under chapter 82 when sent to job worker for production of goods on behalf of principal manufacturer. However, such a provision is absent in the proposed GST regime.

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GST Update 02.07.2016

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