Conditions and restriction in respect of inputs and capital goods sent to the job worker

If the inputs or capital goods are not returned to the principal within the time stipulated in Section 143, the challan issued under sub-rule (1) shall be deemed to be an invoice for the purposes of this Act. [ Read – Rule 10 (4) of Draft GST ITC Rules ]

Issue

Here the date of challan will become the time of supply and accordingly the tax paid on the basis of such challan will attract interest and penalty which will cause undue hardship to the assessee.

Suggestions

• It is suggested that no interest or penalty be levied and tax paid by Principal on deemed supply be refunded if Job worker subsequently returns the processed inputs/capital goods to principal.

• Alternatively, it is suggested that these cases may call for reversal of credit which would also be in lines with Rule 4(5) CENVAT Credit Rules, 2004.

Source ICAI Suggestions on GST Rules Submitted to Govt of India