Job-work under GST

September 23,2016
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Govind Patwardhan, Advocate

On 14th  June Model draft of GST was published. If read properly one will realise that there are more thorns than roses. GST Council is now in place and will discuss and finalise the Model GST Act. This is right time to examine, discuss, represent and if necessary oppose the unjustifiable provisions proposed in Model draft.

It appears that those who drafted it have lost sight of change in basis of tax. Excise is old levy on manufacture of goods. It started in 1870 with salt which became major source of revenue at that time. Excise rules were used to put iron grip over production/manufacturing and collect maximum revenue at first point. Sales tax was unheard at that time. Whether you have sold the goods or whether you have received consideration, were not relevant points. Excise is first point taxation. Therefore input credit is restricted to inputs upto removal of goods from place of manufacture.

There is sea change in the way business transactions take place today. It is very rare that all processes of manufacture are carried out under one roof. Manufacture has different meaning under different laws. Even though excise is on manufacture, since last many years, assessable value is determined with reference to sale price/MRP etc. However many inputs in the nature of expenses or assets necessary for business are after removal. In order to give cenvat credit to such expenses some provisions were made. It has resulted into too many arbitrary provisions.

Many provisions in Model draft of GST appear to be copied from excise. One such example is Job work. It has a special meaning under excise. If the manufacturer gets some processes done outside his factory at present there are stringent rules and procedure. It has relevance in excise as it is one time tax.

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