Waste and scrap generated during job work is a taxable supply. Section 143(5) of the CGST Act provides that waste and scrap generated during job work may be supplied by the job worker directly from their place of business on payment of tax if the job worker is registered, or by the principal if the job worker is not registered.
This article explains the taxability and compliance requirements.
Taxability of Waste and Scrap
Waste and scrap generated during job work is treated as a supply by the principal. GST at the applicable rate (typically 18%) applies on the value of the scrap.
Who Pays the Tax?
- If the job worker is registered: The job worker can supply the scrap directly from their premises on payment of tax.
- If the job worker is not registered: The principal must supply the scrap and pay the tax.
Invoicing
The principal must issue a tax invoice for the deemed supply of scrap if the job worker is unregistered. If the job worker is registered, the job worker issues the invoice.
Valuation
The value of the scrap is the transaction value — the price at which it is sold. If the scrap is retained by the job worker, the value is the market value.
Practical Compliance
- Maintain records of scrap generated during job work.
- Ensure that GST is paid on the value of scrap.
- Issue proper invoices for the supply of scrap.
- Report the supply in GSTR-1.
Conclusion
Waste and scrap generated during job work is taxable. The job worker or principal, depending on registration status, must pay GST and issue proper invoices.
At Anuj Desai & Associates, we provide expert advisory services on GST for job work waste and scrap. Our team can help you comply with the taxability requirements.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.