JANUARY 31, 2018

By S Narayanan, Advocate

THE Government has done good in retaining the benefit of Job work under GST as per Section 143 (1) r/w 143 (1)(b) of CGST Act, 2017, so that registered person mainly producing Motor Vehicles or Motor vehicle parts can avail ITC credit of SGT tax suffered on Moulds and dies, jigs and fixtures, or tools and then send the same under Challan without payment of Tax in GST to vendor-manufacturer / job worker for use in further manufacture of taxable final product.

It is customary in automobile business for the Principal to arrange for Moulds and dies, jigs and fixtures, or tools by buying them and sending the same to Vendors under challan (without payment of duty / tax), who produces the component and supplies on payment of tax. Such specified capital goods are owned by the Principal and the raw materials / inputs are not always sent by the Principal.

The Government has also taken to ensure that time limit of 3 years applicable to Capital goods are not applicable to "Moulds and dies, jigs and fixtures, or tools" by carving out an exception in Section 143 (1)(b) of CGST Act, 2017, as the Government has realised that such toolings are used for production by vendors, fairly on permanent basis.

But the key point which has been missed out by the Government in the said provisions of Section 143 (1)(b) is that such toolings viz. "Moulds and dies, jigs and fixtures, or tools" supplied by Principal are invariably used by the Vendor for further manufacture using their own raw material / or own inputs who then supply the manufactured component to the Principal. As the raw material or inputs are not always supplied by Principal, the words "vendor" should also be added alongwith "Job worker" (as suggested below ), in the provisions of Section 143 (1) and 143 (1)(b) of CGST Act, 2017 or else it will lead to umpteen number of audit objections and unwarranted litigations and the whole purpose for which the said provisions have been made - to allow Moulds and dies, jigs and fixtures, or tools to be sent without payment of tax in GST under challan will be lost and the provisions will remain as a show piece in books but not being capable of being implemented, causing irreparable financial injury to the trade.

The need for the said amendment is necessary due to the definition of "job work"/ "job worker" u/s 2 (68) and the definition of "Principal" u/s 2 (88) which read thus-

"job work" means any treatment or process undertaken by a person on goods belonging to another registered person and the expression "job worker" shall be construed accordingly;

"principal" means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both;

Infact, under the erstwhile Cenvat Credit Rules 2004, this was a big lacuna in the erstwhile provisions leading to huge litigation which should not be repeated in GST regime and after constant representation from trade, the Government in the provisions of CCR, 2004 carried out amendment, almost after 12 years of introduction of Cenvat Credit Rules 2004. The said unintended error in the said provisions of erstwhile provisions of Rule 4 (5)(b) was corrected as under as per the erstwhile Notification No. 13/2016-C.E. (N.T.) , dated 1-3-2016.

[(b) The CENVAT credit shall also be allowed to a manufacturer of final products in respect of jigs, fixtures, moulds and dies or tools falling under Chapter 82 of the First Schedule to the Excise Tariff Act, sent by such manufacturer to,-

(i) another manufacturer for the production of goods; or

(ii) a job worker for the production of goods on his behalf, according to his specifications:

Provided that such credit shall also be allowed where jigs, fixtures, moulds and dies or tools falling under Chapter 82 of the First Schedule to the Excise Tariff Act, are sent by the manufacturer of final products to the premises of another manufacturer or job worker without bringing these to his own premises.]

Hence, there is a dire need for amending the provisions of Section 143 (1) and 143 (1(b) and provisos thereunder and corresponding amendments in SGST by the respective States is also required, so that trade does not suffer.

Suggestion

The words "or another manufacturer - supplier for the production of goods" needs to be added as indicated below in section 143.

143. Job work procedure. - (1) A registered person (hereafter in this section referred to as the "principal") may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker or another manufacturer-supplier for the production of goods for job work and from there subsequently send to another job worker and likewise, and shall,-

(a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out, to any of his place of business, without payment of tax;

(b) supply such inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out from the place of business of a job worker or another manufacturer-supplier for the production of goods on payment of tax within India, or with or without payment of tax for export, as the case may be:

Provided that the principal shall not supply the goods from the place of business of a job worker or another manufacturer-supplier for the production of goods in accordance with the provisions of this clause unless the said principal declares the place of business of the job worker as his additional place of business except in a case-

(i) where the job worker or another manufacturer-supplier for the production of goods is registered under section 25; or

(ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner.