Frequently Asked Questions
What are consequences if inputs and/or capital goods are not received back within stipulated time?
Section 143(3) and 143(4) of the Act and also rule 45(4) of the Rules provide that if the inputs and/or capital goods are not received back by the principal within stipulated time or are not supplied from the place of business of the job worker, it shall be deemed that such inputs and/or capital goods had been supplied by the principal to the job worker on the day when the said inputs were sent out. Consequently, in addition to applicable tax, the principal will also become liable for interest on late payment of tax. The tax so paid in turn will be eligible for input tax credit in the hands of job worker. However, in case the job worker is not registered under GST, it will lead to loss of tax.
If removal of goods for job work is deemed as supply on invocation of sections and rule mentioned above, the principal shall issue an invoice for the same and declare such supplies in his return for that particular month in which the time period of one year/ three years has expired.
The CBIC vide circular number 38/12/2018 dated 26th March, 2018 has clarified that if such goods are returned by the job worker after the stipulated time period, 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 registered. If the job worker is not registered, the principal will be liable to tax on reverse charge basis in terms of the provisions of section 9(4) of the CGST Act, 2017
The understanding of law in the circular, so far it relates to consequences of return of goods by jobworker beyond the stipulated time limit, need to be revisited. In UCO Bank v Commissioner of Income Tax 237 ITR 889; 2002-TIOL-697-SC-IT-LB, the Apex Court has observed “Also a circular cannot impose on the taxpayer a burden higher than what the Act itself, on a true interpretation, envisages”.