CBIC clarifies applicable rate of GST on Job work service and Manufacturing Service

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Gst rate on job work services

gst rate on job work


Background:

Entry at item (id) had been inserted in Services Rate Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017 (“Services Rate Notification”) under heading 9988 w.e.f October 1, 2019 to implement the recommendation of the GST Council to reduce rate of GST on all job work services, which earlier attracted 18% rate, to 12% for all services by way of job work.
Relevant entry at item (id) under S.No. 26 of the Services Rate Notification reads as under:
“Services by way of job work other than (i), (ia), (ib) and (ic) above;”
However, this raised doubts regarding the scope of the above entry and it was being doubted that this makes the entry at item (iv) which covers “manufacturing services on physical inputs owned by others” with a GST rate of 18%, redundant.
Relevant entry at item (iv) under S.No. 26 of the Services Rate Notification reads as under:
“Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia),(ib), (ic), (id), (ii), (iia) and (iii) above.”
Clarification about Gst rate on job work services:
Hence, the CBIC vide Circular No. 126/45/2019 – GST dated November 22, 2019 (“the Circular”) has clarified as under –
  • There is a clear demarcation between the scope of the entries at item (id) & item (iv) under heading 9988 of the Services Rate Notification.
  • Entry at item (id) covers only job work services as defined in Section 2(68) of CGST Act, 2017 i.e. services by way of treatment or processing undertaken by a person on goods belonging to another registered person.
  • On the other hand, the entry at item (iv) specifically excludes the services covered by entry at item (id), and therefore, covers only such services which are carried out on physical inputs (goods) which are owned by persons other than those registered under the CGST Act.
Get full text of circular of GST rate on job work services:

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