Clarification issued by the CBIC on job work vide Circular No. 126/45/2019


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In this article we discuss about the clarification issued by the CBIC on job work vide Circular No. 126/45/2019-GST on the dated 22nd November 2019

To overcome from the doubt which is arise in previous notifications on job work and manufacturing process CBIC issued a clarification on job work vide Circular No. 126/45/2019-GST.

Conclusion of this circular: –

  • If any service provided to the registered person then this service will be considered as Job work service and GST liable @ 12%.
  • If any service provided to the unregistered person then this service will be considered as manufacturing service and GST liable @ 18%.
  • This circular is not applicable for specified services mentioned GST Tariff Heading 9988 in clause (i), (ia), (ib) and (ic).

Job work Means: –

As per GST Act “job work” means any treatment or process undertaken by a person on goods belonging to another registered person.

The person who does the said job work called ‘job worker’.

Accordingly;

Job work means any treatment or processing undertaken by a person (i.e. Job Worker) on raw materials or semi-finished goods which is supplied by the principal manufacturer.

Extract of Circular No. 126/45/2019-GST

The CBIC has issued clarifications on the scope of the Notification entry at item (id), related to job work, under heading 9988 of Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017.

The doubts have been raised with regard to scope of the notification entry at item (id) under heading 9988 of Notification No. 11/2017-Central Tax (Rate) dated 28- 06-2017 inserted with effect from 01-10-2019 to implement the recommendation of the GST Council to reduce rate of GST on all job work services, which earlier attracted 18 % rate, to 12%.

It has been stated that the entry at item (id) under heading 9988 of Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017 inserted with effect from 01-10-2019, prescribes 12% GST rate for all services by way of job work.

This makes the entry at item (iv) which covers “manufacturing services on physical inputs owned by others” with GST rate of 18%, redundant.

The matter has been examined. The entries at items (id) and (iv) under heading 9988 read as under:

(id) Services by way of job work other than (i), (ia), (ib) and (ic) above; GST Rate @ 12%
(iv) Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ib), (ic), (id), (ii), (iia) and (iii) above. GST Rate @ 18%

Conclusion of this circular: –

  • If any service provided to the registered person then this service will be considered as Job work service and GST liable @ 12%.
  • If any service provided to the unregistered person then this service will be considered as manufacturing service and GST liable @ 18%.
  • This circular is not applicable for specified services mentioned GST Tariff Heading 9988 in clause (i), (ia), (ib) and (ic).

 


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