QUESTION

A person registered in Gujarat (say Mr A) purchased Fabric from ludhiana and same is shipped to Mumbai for job work to some other company and later on finished goods transferred to Gujarat for sales.
Which documents are to be issued for transfer and return of fabric. What will be the HSN code tax rate? Who is required to generate E Way Bill?

ANSWER

Facts of the Case: A person registered in Gujarat (say Mr A) purchased Fabric from Ludhiana (say Mr B) and same is shipped to Mumbai for job work to some other company (say Mr C) and later on finished goods transferred to Gujarat for sales. Which documents are to be issued for transfer and return of fabric. What will be the HSN code tax rate? Who is required to generate E Way Bill?

Law Applicable: Circular No.38/12/2018 GST

8. Movement of goods from the principal to the job worker and the documents and intimation required therefor:

8.2 Legal provisions: Section 143 of the CGST Act provides that the principal may send and/or bring back inputs/capital goods for job work without payment of tax, under intimation to the proper officer and subject to the prescribed conditions. Rule 45 of the CGST Rules provides that the inputs, semi-finished goods or capital goods being sent for job work (including that being sent from one job worker to another job worker for further job work or those being sent directly to a job worker) shall be sent under the cover of a challan issued by the principal, containing the details specified in rule 55 of the CGST Rules. -------------------- Further, as per the provisions contained in rule 138 of the CGST Rules, an e-way bill is required to be generated by every registered person who causes movement of goods of consignment value exceeding fifty thousand rupees even in cases where such movement is for reasons other than for supply (e.g. in case of movement for job work). Further, the third proviso to rule 138(1) of the CGST Rules provides that the e-way bill shall be generated either by the principal or by the registered job worker irrespective of the value of the consignment, where goods are sent by a principal located in one State/Union territory to a job worker located in any other State/ Union territory. -------------------------------

(iv) Where the goods are sent directly by the supplier to the job worker: In this case, the goods may move from the place of business of the supplier to the place of business/premises of the job worker with a copy of the invoice issued by the supplier in the name of the buyer (i.e. the principal) wherein the job worker's name and address should also be mentioned as the consignee, in terms of rule 46(o) of the CGST Rules. 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 terms of para (i) above.

Conclusion: As per the aforementioned Circular the process of sending goods directly to Job worker will take place as follows:

1. Mr B will issue invoice and generate E Way Bill (Bill to Mr A and ship to Mr C). 

2. 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 Mr A is required to issue Challan for job work Mr C but as there is no movement of goods EWB is not required.

3. After completing Job work Mr C can send goods on Challan (The value of goods in job work challan is value of goods plus job charges) and EWB along with invoice of job work charges. 

Goods can be sent to the buyer directly from the premises of job worker only if Principal declares the job worker's place of business/premises as his additional place of business or if the job worker is registered.

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. 

So far as generation of EWB is concerned, general provisions of E Way Bill will apply as in case of normal transactions.

As per the third proviso to rule 138(1) of the CGST Rules provides that the e-way bill shall be generated either by the principal or by the registered job worker irrespective of the value of the consignment, where goods are sent by a principal located in one State/Union territory to a job worker located in any other State/ Union territory. 

NOTIFICATION NO. 11/2017 CENTRAL TAX (RATE)

HSN code of Job work is 9988 and rate of tax is 5% if Service by way of Job work is in relation to Textiles and textile products falling under Chapter 50 to 63 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975) otherwise rate of tax is 12%. (Reply dt. 05/02/2021)