Section 19 to Section 21 CGST ACT 2017 –Simplified GST Series -Part-12
Section 19– Taking input tax credit in respect of inputs and capital goods sent for job work-Simplified
(1) The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on inputs sent to a job worker for job work.
(2) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the “principal” shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job-work without being first brought to his place of business
Analysis- This provision relates to availment of credit of input tax on goods sent for job work.
Related provisions of statute-
1. Rule 45- Conditions and restrictions in respect of inputs and capital goods sent to the job worker
2. Section 143- Job Work Procedure
3. Rule 55- Transportation of goods without issue of invoice
4. Circular No. 38/2018 dated 26.03.2018 issued by CBIC being clarifications on issues related to Job Work
Relevant Definitions–
1. Job Work- Any treatment or process undertaken by a person on goods belonging to another registered person
2. Job worker: A person who undertakes any treatment or process on goods belonging to another registered person.
3. Principal: A person on whose behalf an agent carries on the business of supply or receipt of goods or services or both.
Section 19(1) – The principal can take credit on inputs sent to job worker for job work only if he fulfils the conditions prescribed in Rule 45.
Section 19(2)- Notwithstanding anything contained in Sec 16(2)(b) –i.e Condition for availment of credit –Actual receipt of goods does not required to be fulfilled to avail credit if the inputs are directly sent to a job worker for job-work without being first brought to his place of business.
(3) Where the inputs sent for job-work are not received back by the “principal” after completion of job-work or otherwise or are not supplied from the place of business of the job worker in accordance with clause (a) or clause (b) of sub-section (1) of section 143 within one year of being sent out, it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out:
Provided that where the inputs are sent directly to a job worker, the period of one year shall be counted from the date of receipt of inputs by the job worker.
Analysis- The inputs, after completion of job-work, are to be received back by the principal within 1 year of their being sent out.
√ In case of non-receipt of the inputs within the time prescribed, 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 has expired.
√ In case of direct supply, the period of 1 year shall be reckoned from the date the job worker receives such inputs .
(4) The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on capital goods sent to a job-worker for job-work.
(5) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the “principal” shall be entitled to take credit of input tax on capital goods even if the capital goods are directly sent to a job worker for job-work without being first brought to his place of business.
(6) Where the capital goods sent for job-work are not received back by the “principal” within a period of three years of being sent out, it shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out:
Provided that where the capital goods are sent directly to a job worker, the period of three years shall be counted from the date of receipt of capital goods by the job worker
(7) Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies, jigs and fixtures, or tools sent out to a job-worker for job-work.
Analysis- The principal can take credit of input tax on capital goods sent to job-worker subject to the fulfilment of conditions stated in Rule 45.
- The principal can take credit of capital goods even if such capital goods are sent directly to job-worker’s place without bringing to principal’s place of business
- The capital goods, after completion of job-work, are received back by him within 3 years of their being sent out.
- If the capital goods are not received back within 3 years, it shall be deemed that such capital goods had been supplied by principal to the job worker on the day when the said capital goods were sent out.
- Procedures listed in respect of inputs under Rule 45 of the Central Goods and Service Tax Rules,2017 will equally apply to capital goods also
Section 20- Manner of distribution of credit by Input Service Distributor -Simplified
(1) The Input Service Distributor shall distribute the credit of central tax as central tax or integrated tax and integrated tax as integrated tax or central, by way of issue of a document containing, the amount of input tax credit being distributed in such manner as may be prescribed.
Analysis- Related Provisions of the Statute-
1. Section 2(61) – Definition of ‘Input Service Distributor’
2. Rule 39- Procedure for distribution of input tax credit by Input Service Distributor
3. Rule 54- Tax invoice in special cases
4. Rule 65 – Form and manner of submission of return by an Input Service Distributor
- An ISD shall distribute the eligible ITC in accordance with Rule 39.
- Input Service Distributor (ISD) is an office of the supplier of goods or services or both where a document (like invoice) of services attributable to other locations are received . Since the services relate to other locations the corresponding credit should be transferred to such locations (having separate registrations) as services are supplied from there.
- Example- Corporate office of XYZ Company Ltd., is at New Delhi, having its business locations of selling and servicing of goods at New Delhi, Chennai, Mumbai and Kolkata. For example, if the software license and maintenance is used at all the locations, invoice indicating CGST and SGST is received at Corporate Office. Since the software is used at all the four locations, the input tax credit of entire services cannot be claimed at New Delhi. The same has to be distributed to all four locations. For that reason, the Delhi Corporate office has to act as ISD to distribute the credit.
| (2) The Input Service Distributor may distribute the credit subject to the following conditions, namely:
(a) the credit can be distributed to recipients of credit against a document containing such details as may be prescribed; (b) the amount of the credit distributed shall not exceed the amount of credit available for distribution; (c) the credit of tax paid on input services attributable to recipient of credit shall be distributed only to that recipient; (d) the credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipient(s) to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union Territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period;. (e) the credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union Territory of such recipient, during the relevant period, to the aggregate of the turnover of all recipients and which are operational in the current year, during the said relevant period.
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Analysis- Conditions to distribute credit –
1. Credit to be distributed to recipient under prescribed documents containing prescribed details. Such document should be issued to each of the recipient of credit.
2. Credit distributed should not exceed the credit available for distribution.
3. Tax paid on input services used by a particular location (registered as supplier), is to be distributed only to that location
4. Credit of tax paid on input service used by more than one location who are operational is to be distributed to all of them based on the pro rata basis of turnover of each location in a State to aggregate turnover of all such locations who have used such services
Note: The period to be considered for computation is the previous financial year of that location. If it does not have any turnover in the previous financial year, then previous quarter of the month to which the credit is being distributed.
Section 21- Manner of recovery of credit distributed in excess-Simplified
Where the Input Service Distributor distributes the credit in contravention of the provisions contained in section 20 resulting in excess distribution of credit to one or more recipients of credit, the excess credit so distributed shall be recovered from such recipient(s) along with interest, and the provisions of section 73 or 74, as the case may be, shall mutatis mutandis apply for determination of amount to be recovered.
Analysis- Excess Credit distributed in contravention of provision: Excess credit distributed to one or more recipient of credit in contravention of ISD provision under Section 20 is recoverable from the recipient of such credit along with Interest. The recovery would be under the provisions of Section 73 or 74.
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