Job-Work Question No.22

QUESTION

Dear Sir, A has placed an order on B for supply of goods. B has sent the semi-finished goods to C to compete further manufacturing process on job-work basis. Thus, B has raised delivery challan + eway bill for the physical movement of goods from B to C. C has competed the job. Now, B wants to supply the goods directly from C`s premises to A. For this, B has raised invoice on A say on 1.1.2020. However, A does not want to take delivery of goods since he wants to retain the goods at C`s premises for conducting a special testing of these goods in the premises of C. C, after completion of testing, shall dispatch the goods to A after about 2 months from the date of invoice of B. Following queries arise: i. Whether C can retain the goods for 2 months for job-work of A (special testing) from the date of invoice of B; ii. Can A avail ITC on the basis of B`s original copy of invoice (as the goods have not been received); iii. Can A issue delivery challan to C for job-work of testing but no e-way bill as there is no physical movement of goods; iv. Can C after completing the testing, send the goods to A on delivery challan plus e-way bill; v. How B will close his account of job-work since he has not received back goods from C. Kindly advice the correct procedure to be followed in the above transaction. Best regards, Satish Talnikar (14376)

ANSWER

Law Applicable:Section 143 of CGST Act
Provided that the principal shall not supply the goods from the place of business of a job worker in accordance with the provisions of this clause unless the said principal declares the place of business of the job-worker as his additional place of business except in a case'
(i) where the job worker is registered under section 25; or
(ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner.

Circular No.38/12/2018

7. Supply of goods by the principal from job worker's place of business/ premises:
Doubts have been raised as to whether the principal can supply goods directly from the job worker's place of business / premises to its end customer and if yes, whether the supply will be regarded as having been made by the principal or by the job worker. It is clarified that the supply of goods by the principal from the place of business / premises of the job worker will be regarded as supply by the principal and not by the job worker as specified in section 143(1)(a) of the CGST Act.

8.4 (iii) Where the goods are returned to the principal by the job worker: The job worker should send one copy of the challan received by him from the principal while returning the goods to the principal after carrying out the job work.

9. Liability to issue invoice, determination of place of supply and payment of GST: ----------
(ii) Supply of goods by the principal from the place of business/premises of job worker: ----------Since the supply is being made by the principal, it is clarified that the time, value and place of supply would have to be determined in the hands of the principal irrespective of the location of the job worker's place of business/premises. Further, the invoice would have to be issued by the principal. ------------
Illustration: The principal is located in State A, the job worker in State B and the recipient in State C. In case the supply is made from the job worker's place of business / premises, the invoice will be issued by the supplier (principal) located in State A to the recipient located in State C. The said transaction will be an inter-State supply. In case the recipient is also located in State A, it will be an intra-State supply.

10. It is clarified that, in view of the provisions contained in clause (b) of sub-section (2) of section 16 of the CGST Act, the input tax credit would be available to the principal, irrespective of the fact whether the inputs or capital goods are received by the principal and then sent to the job worker for processing, etc. or whether they are directly received at the job worker's place of business/premises, without being brought to the premises of the principal. It is also clarified that the job worker is also eligible to avail ITC on inputs, etc. used by him in supplying the job work services if he is registered.

SECTION 10 of IGST Act

(1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,''

(a) where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;

(b) where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;

Conclusion:In the instant case following transactions are involved:
Transaction Nature of supply Documentation Place of supply
B to C Send goods for Job work Delivery challan & E Way Bill 10(1)(a)
C to B Job work Invoice (Job work charges) 12(2)
B to A Sale of goods Invoice (Bill to A ship to C) 10(1)(a)
A to C Send goods for Job work Delivery challan 10(1)(a)
C to A Job work Delivery challan, Invoice (Job work charges) & E Way Bill 12(2)

Point wise reply is as follows:

1. Yes, C can retain the goods for 2 months for job-work of A (special testing) from the date of invoice of B.

2. In view of the provisions contained in clause (b) of sub-section (2) of section 16 of the CGST Act, the input tax credit would be available to the principal, irrespective of the fact whether the inputs or capital goods are received by the principal and then sent to the job worker for processing, etc. or whether they are directly received at the job worker's place of business/premises, without being brought to the premises of the principal. Thus A can avail ITC on the basis of B`s original copy of invoice even if the goods have not been received.

3. In case goods are directly send by principal to Job work premises without bringing goods to its own premises then the buyer (i.e., the principal) shall issue the challan under rule 45 of the CGST Rules and send the same to the job worker directly. In the instant case A is required to issue Challan for job work but as there is no movement of goods EWB is not required.

4. After completing Job work C can send goods on Challan and EWB along with invoice of job work charges.

5. Supply of goods by the principal from the place of business / premises of the job worker will be regarded as supply by the principal and not by the job worker. (Reply dt. 6/1/2020)