Q 1. When the goods of the principal are directly sent to the premises
of the job worker, whether ITC can be taken by the said
principal?
Ans.
Yes.
As per section 19 (2)
The principal
shall be entitled to take ITC 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.
The principal should avail the ITC
based on proper tax invoice as issued under section 31 when the
goods are delivered at the premises of the job worker by the supplier.
Q 2. What is the time limit for claiming ITC on capital goods sent from
the principal’s place of business to job worker for job work?
Ans.
As per section 19 (4)
subject to such conditions and restrictions as may be prescribed (Rule 45),
The principal shall be entitled to take ITC on capital goods sent to a job worker for job work.
As per section 19(5)
Notwithstanding anything contained in section 16(2)(b),
The principal shall be
entitled to take ITC 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.
As per section 19(6)
Where the capital goods sent for job work are
not received back
by the principal within a period of three 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:
Provided that
where the capital goods are sent directly to a job
worker,
the period of three years shall be counted from the date of
receipt of capital goods by the job worker.
Analysis of the above provisions,
it can be concluded that for
claiming the ITC in respect of capital goods,
the time limit and conditions as provided in section 16 except section 16(2)(b)
i.e., receipt of goods, are applicable,
Hence, ITC can be
taken at the time of purchase.
Capital goods sent to the job worker
must be received back within 3 years of being sent out; otherwise, it
will be considered as supply by principal to job worker on the day
when the said capital goods were sent out.
Case : - As per Circular No. 38/12/2018, dated 26-3-2018, among other things, it was clarified that if
the goods sent by the principal are returned by the job worker
after the stipulated time period (i.e., 1/3 years), the same would
be treated as a supply by the job worker to the principal and the
job worker would be liable to pay GST if he is liable for
registration in accordance with the provisions contained in the
Act. Further, as per the second proviso to section 16(2)(d) of the
Act, the recipient is required to make payment to the supplier
within 180 days from the date of invoice.
Q 3. Whether in above case the principal would be able to claim ITC on
the basis of invoice issued by the job worker when it appears
that the above condition of payment specified in the second
proviso to section 16(2)(d) does not seem to get fulfilled as in
such situations there would be no liability of the principal to
make such payment to the job worker?
Ans.
Yes.
In cases where the goods are returned by the job worker after
stipulated time period,
two supplies are deemed to have occurred:
from the principal to job worker and
from the job worker to the
principal.
Both the parties shall raise invoices and GST shall be paid
on the same.
ITC can be availed on such GST paid.
Section 16(2)(d) of the CGST Act, 2017 mandates payment to the
supplier within 180 days.
Supply between principal and job worker
are deemed supplies involving no actual flow of money.
Since ‘consideration’ under GST law is defined in a wide manner, payment
can be said to have been made even by way of set-off.
However, this is debatable issue in the GST Law, which needs to be specifically
addressed and proper clarification is required from GST Department to end the debate.
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