Circular No. 126 dated 22-11-2019 has clarified that ,if manufacturing services are performed on goods belonging to unregistered persons, then tax rate shall be 18%.
Apart from textile, jewellery other sectors like footwear, leather goods, food products, clay bricks , handicraft goods manufacturing for unregistered persons shall also invite 18% tax rate as compared to 5% tax rate if manufacturing is done for registered person.
Changes w.e.f 01-10-2019
W.e.f. 01-10-2019, Residuary Job Work for registered person is taxable @ 12% .Diamonds Job work for registered person is taxable @ 1.5%.
Sectors not affected
However, Tax rate for printing of newspapers, books, and Items falling under Chapter 48 and 49 and tailoring service carried out for both registered as well as unregistered person shall remain at 5%.
Thin line differences in Manufacturing, Job work and repair
Repair services are already taxable @ 18%, irrespective of being carried out for registered or unregistered person. All other Job work processes which are not in nature of manufacture might also get taxed @ 18%. There is thin line Difference between manufacture, job work and repair and there may be overlaps also. Like Job work may involve both manufacturing as well as non manufacturing processes. Repair is carried out on something which is defective.
Processes in textile industry like ginning, spinning, weaving, mercerizing, bleaching, printing, sizing, desizing, processing, dyeing finishing, cleaning, pressing, , coloring and laundary services might come under scanner, which is the second largest employer of the country.
Need to make representation
Clarification is in wake of notification 20/2019-CTR dated 30-09-2019 changing tax rates for residuary job work for registered persons which is not as per recommendations of GST Council dated 20-09-2019 which sought to change tax rates for engineering industry only. This appears to an un-intended outcome of the Circular especially on textile, jewellery, footwear, leather goods, food products, clay bricks and handicraft goods industry. Relevant Industries needs to make representation on the issue.
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