Job Work: Comparison in Existing Scenario Vs GST regime

EXISTING SCENARIO: Under the current regime of Central Excise Law, the goods sent on job work is exempt from payment of excise duty under notification 214/86-Central Excise dated 25/3/1986. The second alternative procedure for goods sent for Job work is Rule 4(5)(a) of Cenvat Credit Rules, 2004. This rule states if the principal manufacturer pays the excise duty on final goods, the job worker is not liable to pay excise duty on intermediate good of such final product on which he has performed job work. Hence, no excise duty is payable on job work charges.
Now the question arise whether the service tax is payable on job work charges? If the process undertaken on job work goods amount to manufacture, the same shall not be liable to service tax by virtue of clause (f) of Negative list. But if the process undertaken does not amount to manufacture then the same is also not liable to service tax by virtue of entry 30(c) of Mega exemption notification number 25/2012 dated 20 June 2012.
Even the job work undertaken by textile processor is exempt by notification number 30/2004 from payment of excise duty. The textile processing is also exempt from payment of service tax.
Therefore excise duty and service tax are not payable by job worker under present taxation regime. Now let us look picture into the GST regime.

GST REGIME:
The job work can be undertaken under the CGST Act. As per section 143, the material can be sent to job worker and return after job work without payment of Tax. Thus, the movement of goods will not be liable to GST.
But the job work charges charged by the job worker will be liable to payment of GST. This is because of the entry 3 of Schedule II of the GST Act
This schedule contains the activities to be treated as supply of goods or supply of services so that the services so stated get covered in Scope of Supply contained in Section 7 of the CGST Act, 2017. The Entry 3 of this schedule relates to Treatment and process and states that “Any treatment or process which is applied to another person's goods is a supply of services”.
Therefore this entry quite evidently covers activities performed by a job worker under supply of service. Further the list of exemptions regarding the services gives exemption vide the Serial No. 78 to only following service
“Carrying out an intermediate production process as job work in relation to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce;”
No other exemption with regards to Job work has been provided. Thus, the intermediate production process as job work in any case other than aforementioned shall be chargeable to tax under GST. Hence, job charges paid to a job worker shall now be taxable.
Since tax rate relating to job charges has not been mentioned as a separate entry in the schedule, so they shall be covered by residuary entry 36 of the schedule which is
“All other services not specified elsewhere” and shall be taxable at the rate of 18%.
The taxation of job charges shall bring a whole net of job workers under the taxation regime who were enjoying the exemptions till date. This thus is yet again a big step from Government to bring a whole new lot of assesses to taxation regime. As per our guessing this is done by government to establish a clear chain of manufacturing of a good and bringing all the value additions in the taxation ambit.
Thus, under GST regime the intermediate process performed by a job worker is a service and liable to be taxed at the rate of 18%. The textile, Patta Patti job work charges will be liable to GST but the credit of the same will be available to recipient if their final product is liable to payment of GST.
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Job Work: Comparison in Existing Scenario Vs GST regime

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