UNIT III

Job-Work
Job-Work means any treatment or process undertaken by a person on goods
belonging to another registered person. The person who does the job-work will
be considered as job-worker. The provider of goods and services is hereby called
as principal, the ownership of goods does not transfer to job-worker but it
remains with the principal, the job-worker is required to carry-out the process or
operations as per the instruction provided by the principal.

When goods sent to job-worker without payment of tax

In these types of cases the reversal of ITC is not provided, the goods can directly
be delivered to the job-worker while ITC can be availed by principal and a
foremost requirement is to inform the officer under which jurisdiction such
supply is covered regarding the detail description of the goods. The time-limit for
returning the goods back by the job-worker is within 1 year in case of normal
inputs and 3 years in case of capital goods.

There are 3 types of clearance by the job-worker namely the clearance of goods
to another job-worker for further processing, the dispatch of goods to any of the
place of business of the principal, to sell the goods on behalf of principal within
India or outside India.

The responsibility of keeping proper accounts regarding the goods sent to job-
work is solely lie with the principal.

The waste and scrap generated during the job-work may be directly supply from
his place of business on payment of tax, this is done by the principal if the job-
worker is not registered.

Exemptions from registration under GST to job-workers

The job-workers which are engaged in inter-state supply of services to a
registered person have been exempted to get registered under GST.

Determination of inter-state and intra-state supply

The GST is the destination based tax applicable on transaction involving supply of
goods and services so the tax is payable in the state where such goods or services
are finally consumed.

When transaction between the 2 registered dealers occur within the state such
supply fall under intra-state supply. In said case the CGST, SGST/UTGST as
applicable may attract the chargeability of GST. The tax-rate applicable on
commodity or services is shared in equal proportion between the CGST,
SGST/UTGST.

When supply of goods/services is between 2 different states one of them may be

the union territory or both of them may be the union territory fall under inter-
state supply. The supply received from outside India also fall under inter-state
supply and in case of said supply the IGST will attract the supply.

In case where supply fall under exempted category or zero-rated supply it should
be mentioned in the invoice with NIL or zero rate as the case may be.

Debit note
A debit note may be issued where tax invoice has been issued for of any goods or
services charged is found to be less than the taxable value of such supply. In said
case the supplier shall issue a debit note to the recipient.

The registered person who issued a debit note shall declare the detail of such
note in the return of month during which such debit note has been issued.

Credit Note
Where a tax invoice has been issued for supply of any goods/services and the
taxable value charged in that invoice is found to exceed the taxable value payable
in respect of such supply. Or

Where the goods supplied are returned by the recipient or the supplied goods or
services are found to be deficient.

In the given cases the supplier may issue the credit note, credit note cannot be
issued for bad debts.

The person who issues the credit notes shall declare the details of such credit
notes in the return of the month in which such credit note has been issued.

Credit note cannot be issued later than

1. September following end of the following year in which such supply is made
or
2. The date of furnishing of the relevant annual return,
Whichever is earlier.
The tax liability shall be adjusted by effect of these notes in such manner as
may be prescribed under the law.
Input tax credit
Input tax credit is a mechanism which avoid the cascading effect. It is based on
VAT concept which was earlier prevailing before GST regime. The supplier of
goods/services can avail credit of CGST/SGST/UTGST and IGST charged by input
supplier of goods/services and capital goods.

Input means any goods other than the capital goods, Capital goods are those
goods whose value is capitalized in the book of accounts. Input tax credit on
capital goods can be availed inn one shot means 100% at the time of
capitalization in book of accounts. It cannot be forwarded for following years.

For availing input tax credit such goods or services are use in the course of or
furtherance of business.
GST paid by the recipient of supply under reverse charge during the current
month will become eligible ITC.

Person registered under composition scheme is not eligible for ITC.

ITC is available only when GST is leviable on outward supply. In case of zero-rated
supply ITC will be available but in case of exempted supply ITC will not be
available.

The priority list to set of ITC under GST

1. Input credit of IGST- It can be used to set of output liability of IGST/ CGST/
SGST/ UTGST in the same sequence.
2. CGST input credit- It can be used to set of output liability of CGST/ IGST
3. SGST input credit- IT can be used to set of the output liability of SGST/ IGST
4. SGST/UTGST credit can be used for set of in per respective state only. No
cross set of facility among different states/ UTs is allowed.
5. Input tax credit of GST compensation cess can only be utilized for the
payment of GST compensation cess.

Condition must be fulfilled for the claim of ITC

Only registered person can avail the facility of ITC because it is credited under
electronic credit ledger.

The tax invoice is availed by the registered person against the inward supply or a
debit note issued by the supplier or payment made under reverse charge
mechanism or by way of bill of entry

Aforesaid information must be uploaded by the registered person into the GST
portal.

The ITC is available only to the recipient of goods and services and their agents or
other such persons not be the beneficiary.
No ITC will be allowed in case where payment of tax was made in followance of
any order of demand on account of any fraud or wilfull misstatement or any
conceinment of facts.

The time-limit to avail the ITC is:

1. Due date of furnishing the return or the month of September(following end

of financial year to which such invoice pertains) or furnishing the relevant
annual return whichever is earlier.

Items which are not eligible for ITC

Motor vehicles and other conveyance, food and beverages, outdoor catering,
beauty and health services, cosmetic and plastic surgery, membership of a club,
rent a cab, insurance services, work contracts, goods and services, receipt for
construction of immovable property, goods and services received by the non-
resident taxable persons, when goods and services used for personal
consumption and goods lost or stolen/destroyed or written off or disposed off by
way of gift or free samples.

The ITC will not be allowed on capital goods on which depreciation is claimed
under Income tax.

Apportionment of Credit
When goods/services is partly used for business purposes and partly for personal
use the amount of ITC will be reduced proportionately. If in the given cases the
ITC is already availed the amount calculated proportionately will have to be
reversed.

ITC for input service distributor

The input tax credit is available to ISDs if availed ITC is distributed in the same
month and details are submitted to the department.

The ITC on account of IGST shall be distributed as ITC of IGST to every recipient.
The ITC on account of CGST and SGST/UTGST shall be distributed in respect of the
location of the distributor of such ISD.

The input service distributor shall issue an input service distributor invoice clearly
indicating in such invoice that it is issued only for distribution of ITC.

Problem:

On August 30,2019 Y Ltd. of Kanpur supply goods/services to Z Ltd. of Lucknow

taxable value of supply 26,80,000. On August 31,2019 Y Ltd. supplies
goods/services to A Ltd. of Delhi. Taxable value of supply is Rs. 5lac. GST Rate
@18%. Y Ltd. has the following balance in electronic credit ledger.

IGST: Rs.92,000

CGST:Rs.5,000

SGST:Rs.9,00,000

On August 20,2019 Y Ltd. purchases a car from a dealer of Kanpur for its offices
and staff which is only used for performing the duties. GST paid for purchasing the
car which is not included in the above figures is CGST-Rs. 1,68,000, SGST-
Rs.1,68,000. There is no other transaction the month of August 2019. Find out
GST on supply to Z Ltd. and A Ltd. and prepare a statement of availment of input
tax credit.

Answer:

Amount charged by Y Ltd. from Z Ltd. Rs.31,62,4000 and for A Ltd. Rs. 5,90,000.

ITC available through electronic cash ledger on 31 August,2019 IGST-NIL, CGST-

NIL, SGST-Rs.6,58,800

Hint: On purchase of car, ITC is not available. Refer to provisions

NOTE: Any change found is subject to amendment in provisions or rules in the

GST Act and it is suggested to take reference of Act if needed.