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Beneficial provisions related to job work in Budget 2016

MARCH 05, 2016

By Pratik Shah CA, Lucky Ahuja, CA & Anurag Hans, CA

AS a part of Government's ambitious initiative 'Ease of doing business in India', certain procedural reforms have been introduced for job-work process vide notification no. 13/2016-CE, with effect from 01 st day of April, 2016 which are as follows.

Extended Permission for goods sent out for job-work

As per the provisions of sub-rule 6 of rule 4 of CENVAT Credit Rules, 2004, a manufacturer, desirous of sending inputs or partially processed inputs outside its factory for the purpose of job-work, is required to obtain permission from jurisdictional Deputy/Assistant Commissioner, which is valid for a financial year .

Now, validity of permission has been extended to three financial years with effect from April 01st, 2016 to done away with the hassles of frequent renewals.

Inclusion of 'Tools for CENVAT Credit, sent to job-worker  

A manufacturer, sending out jigs, fixtures, moulds and dies for the purpose of further manufacturing according to his specifications to another manufacturer; or a job worker, is allowed to take CENVAT credit as per clause (b) of sub-rule 5 of rule 4 of CENVAT credit Rules, 2004. However, no such credit was available for Tools.

With effect from April 01 st 2016, tools falling under Chapter 82 sent to another manufacturer/job-worker for the production of the goods would also be eligible for CENVAT Credit besides jigs, fixtures, moulds, and dies.

CENVAT Credit distribution by Input Service Distributor (ISD) to Job-worker

With effect from 01st April 2016, Input Service Distributor can distribute the input service credit to an outsourced manufacturing unit which is defined to mean either a job-worker or a manufacturer who manufactures goods for the Input Service Distributor under a contract and are required to pay duty on specified value as per Central Excise Act and rules made thereunder.

Earlier ISD could distribute credit of input services only to its manufacturing units or units providing output services. Rule 7 of the CENVAT Credit Rules, 2004 has been suitably substituted with the new rule to accommodate these changes.

With these procedural, yet important changes, Government's intention and thrust to bring the necessary reforms and provide the conducive environment for growth of business is quite visible. These little changes should certainly be seen as an attempt by the government to restore the faith and confidence of the business community.  

(The authors are from SKP Business Consulting LLP.)

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Sub: Job work permission not reuired

The permission is required only in case where the finished goods manufactured on job work basis are to be cleared from factory of the job worker without bringing back to factory of the supplier. No permission is required to be obtained for sending inputs for processing and return. Please correct the article which is misleading.

Posted by suresh hanamshet