ITC In Respect Of Inputs/Capital Goods Sent For Job Work

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(1) Principal allowed to take input tax credit on inputs sent to a job worker for job work [Section 19(1)] 

The principal shall, be allowed input tax credit on inputs sent to a job worker for job work this shall be subject  to such conditions and restrictions as may be prescribed. 

(2) Input tax credit allowed to principal even if inputs are sent to a job worker directly [Section 19(2)] 

The principal shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job  worker for job work without being first brought to his place of business. 

(3) Consequences if inputs sent for job work are not received back by the principal [Section 19(3)]

Where the inputs sent for job work are not received back by the principal— 

— after completion of job work or otherwise or 

— are not supplied from the place of business of the job worker in accordance with section 143(1)(a) or (b) 

— within one year of being sent out, 

it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said  inputs were sent out. 

Where the inputs are sent directly to a job worker, the period of one year shall be counted from the date of  receipt of inputs by the job worker. 

The period of 1 year mentioned above shall not be applicable in case of moulds and dies, jigs and fixtures, or  tools sent out to a job worker for job work.

Section 143 of CGST Act, 2017 states that a Principal under intimation and subject to such conditions as may  be prescribed can send inputs or capital goods to a job worker without payment of tax for further process or  treatment and from there subsequently to another job worker(s) and shall either bring back such inputs/capital  goods after completion of job work or otherwise within 1 year/3 years of their being sent out or supply such  inputs/capital goods after completion of job work or otherwise within 1 year/3 years of their being sent out,  from the place of business of a job worker on payment of tax within India or with or without payment of tax  for export.

(4) Input Tax Credit on capital goods sent to a job worker [Section 19(4), (5) and (6)] 

The principal shall be allowed input tax credit on capital goods sent to a job worker for job work. 

The principal shall be entitled to take credit of input tax on capital goods even if the capital goods are directly  sent to a job worker for job work without being first brought to his place of business. 

Where the capital goods sent for job work are not received back by the principal within a period of 3 years of  being sent out, it shall be deemed that such capital goods had been supplied by the principal to the job worker on  the day when the said capital goods were sent out. 

Where the capital goods are sent directly to a job worker, the period of 3 years shall be counted from the date  of receipt of capital goods by the job worker.

The period of 3 years mentioned above shall not be applicable in case of moulds and dies, jigs and fixtures, or  tools sent out to a job worker for job work.

Conditions and Restrictions as per Rule 45 –

The following conditions and restrictions are applicable as per Rule 45 –

  1. The inputs, semi-finished goods or capital goods shall be sent to the job worker under the cover of a challan issued by the principal, including where such goods are sent directly to a job-worker.
  2. Where the goods are sent from one job worker to another job worker, the challan may be issued either by the principal or the job worker sending the goods to another job worker. However, this proposition is subject to the following –
    • The challan issued by the principal may be endorsed by the job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal.
    • The challan endorsed by the job worker may be further endorsed by another job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal.
  3. The challan issued by the principal to the job worker shall contain the details specified in rule 55.
  4. The details of challans in respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another during a quarter shall be included in Form GST ITC-04. This form should be furnished on or before the 25th day of the month succeeding the quarter. This period may be extended by the Commissioner.
  5. Where the inputs are not returned (within one year) or capital goods are not returned (within 3 years), it shall be deemed that such inputs or capital goods had been supplied by the principal to the job worker on the day when the said inputs or capital goods were sent out. The said supply shall be declared in Form GSTR-1 and the principal shall be liable to pay the tax along with applicable interest.

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