Allow credit on moulds/dies/jigs/fixtures/tools sent directly to supporting manufacturers
JANUARY 25, 2018
By S Ramani, GM (Legal & Indirect Taxation), Simpson and Company Ltd., Chennai
AUTO components industries get the Patterns/Moulds/ Tools manufactured with the components suppliers.
The components suppliers would manufacture the Patterns and raise bill on their Customers viz. Auto component manufacturers and realize the Pattern/ tool amount whereas they will retain possession of the Patterns/Tools for further use in manufacture of components.
In the erstwhile regime the said Patterns/Tools were exempt form Excise Duty at the hands of components manufacturers under Notification 67/1995-CE.
In the earlier regime there were provisions for sending the credit availed tools to supporting manufacturers.
In the present GST Regime the Auto components manufacturers are compelled to bring in the Patterns/tools for the purpose of availing credit and again they have to send the tools to supporting manufacturers for use in manufacture of components.
Here it is suggested the Govt. to amend Section 19 of CGST Act by adding new section 19A as follows:
"19(A) The Registered Person shall be allowed input tax credit on jigs, fixtures,moulds,tools and dies sent by said Registered person to supporting manufacturer for production of goods according to his specifications;
Notwithstanding anything contained in clause (b) of sub-section (2) of Section 16, the Registered Person shall be entitled to take input tax credit even if such jigs, fixtures, moulds, tools and dies are directly sent to the said supporting manufacturer without being first brought to the premises of Registered person.”
When such tools are sent directly to manufacturer on Bill to Ship to basis the Registered person will be in a position to avail credit as per Explanation clause of Sec.16(2) .
The above amendment will be a facility towards ease of doing business and this amendment would not amount to loss of revenue to Govt. as it is only revenue neutral measure.