QUESTION
I am doing business of Job work. I receive thread from another party and make
cloth from it. HSN Code and tax rate of Thread is different and HSN & Tax rate
for cloth is different. Now question is that when I return back material (after
Job work) to the party, which HSN code I should mention on challan i.e. of
Thread or of Cloth & Rate of tax Thread or Cloth
ANSWER
Facts of the case:
Thread is send for job work on challan, the job worker is returning
back cloth after doing job work on thread.
Law Applicable:
Notification 11/2017-Central Tax (Rate)
| 6. Heading 9988 (Manufacturing services on physical inputs (goods) owned by others) | |
|
(i) Services by way of job work in relation to- (a) Printing of newspapers; b) Textiles and textile products falling under Chapter 50 to 63 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975) (c) all products other than diamonds falling under Chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975) |
2.5% |
Interpretation:
Manufacturing/Job work services on Textile and Textile products are covered
under the Heading 9988 and will be taxable @ 5%. 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. As the job worker is returning the cloth to the
principal after doing job work on thread, the description of goods and HSN code
to be mentioned on challan should be of cloth.
The Job worker issue the tax invoice for the job work services provided by them
and charge Tax on the same @ 5%.
Conclusion:
The product cloth will fall under Chapter 50 to 63 i.e. Textile and Textile
products, thus covered under HSN 9988 and rate of Tax of 5% will be applicable
on job work charges. Job worker will mention the HSN of cloth on the challan.