Section 175 – Inputs removed for job work and returned on or after the appointed day
This section intends to enable the receipt of goods sent on job work before the appointed day but received back after the appointed day. Like the previous sections the time limit has been kept at 6 months from the appointed date to receive back such goods without payment of duty. The provision reads as follows:
Where any inputs received in a factory had been removed as such or removed after being partially processed to a job worker for further processing, testing, repair, reconditioning or any other purpose in accordance with the provisions of earlier law prior to the appointed day and such inputs, are returned to the said factory on or after the appointed day, no tax shall be payable if such inputs , after completion of the job work or otherwise, are returned to the said factory within six months from the appointed day.
The bold marked text is the only addition done in this para in comparison to old draft GST law. This is done so to clarify that the goods can be returned even without doing any job work. In absence of this provision, it could have been interoperated that only job worked goods can be returned back and if the inputs are returned as such without job work, then tax may become payable.
Apart from the above, 3 provisos from the old draft have been replaced to insert another proviso. The old provisos read as follows:
Provided further that tax shall be payable by the job worker if such inputs are liable to tax under this Act, and are returned after a period of six months or the extended period, as the case may be, from the appointed day:
Provided also that tax shall be payable by the manufacturer if such inputs are liable to tax under this Act, and are not returned within a period of six months or the extended period , as the case may be, from the appointed day.
This proviso lead to confusion that GST will be payable by job worker or manufacturer if goods are not returned in the stipulated time period. The literal meaning of this provision was that the manufacture shall be liable to tax if goods are not returned within six months and if the goods are returned after the period of 6 months then the job worker will be liable to pay tax. On completion of exact 6 months, goods are not returned then manufacturer has to pay the duty. Now after 6 month, the job worker has to return the goods then he has to pay GST once again. Now, GST is paid twice on same goods. firstly by principal supplier and then by job worker. Even this was also not clear from these provision in old GST law whether the credit will be available to job worker of the GST paid by principal supplier.
Even we see the provision in current Cenvat credit Rules, 2004 then manufacturer has to reverse the cenvat credit taken on inputs and when the goods are returned after 180 days then credit is to be taken once again. These are very good provision.
The new proviso substituted reads as follows:
PROVIDED FURTHER that if such inputs are not returned within a period of six months or the extended period , as the case may be, from the appointed day the input tax credit shall be liable to be recovered in terms of section 184.
Thus now in event of non return of goods within the stipulated time, section 184 will come into play for the recovery of tax. The section reads as follows:
Where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the earlier law, any amount of tax, interest, fine or penalty becomes recoverable from the taxable person after the appointed day, the same shall be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act.
Thus to conclude the tax on late returned goods will be deemed as a arrear of tax under this act and subsequently no input tax credit will be admissible under this act. Thus, if the inputs are not returned within 6 months then credit will be lapsed.
Hence it is advised to job worker that he should return the goods within 6 months of appointed day whether job work is done or not.
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