Gst in case of toll processing unit
This query is : Resolved
02 August 2017
Sir
We have toll processing unit ie. we have hired one manufacturing unit & we are manufacturing in that plant & paying toll processing charges to owner.
Previously there were no service tax on process amounting to manufacture as per Section 66D(f) of the Finance Act, 1994. Also there were certain exemptions under notification no.25/2012-ST dated 20 June 2012.
As our product was exempt under excise , we were not required to pay Excise as well.
Please explain taxabiity under GST.
Thanks.
We have toll processing unit ie. we have hired one manufacturing unit & we are manufacturing in that plant & paying toll processing charges to owner.
Previously there were no service tax on process amounting to manufacture as per Section 66D(f) of the Finance Act, 1994. Also there were certain exemptions under notification no.25/2012-ST dated 20 June 2012.
As our product was exempt under excise , we were not required to pay Excise as well.
Please explain taxabiity under GST.
Thanks.
02 August 2017
Read section 143 of the GST, in nut shell you can send raw material to your job worker under intimation and you can clear goods from job work location with applicable GST. There is time limit of 1 year.
02 August 2017
Read section 143 of the GST, in nut shell you can send raw material to your job worker under intimation and you can clear goods from job work location with applicable GST. There is time limit of 1 year.
03 August 2017
Nilesh Sir , Thank you very much for reply. In our case , we have taken one plant on rent , here factory building , plant & machinery are owned by other person. We use our material & labour & pay @ Rs.2.50 per kg to owner of plant.
In this case , please let me know whether GST is payable on payment made to plant owner ( in our case we call it as toll processing unit & toll processing charges.
In this case , please let me know whether GST is payable on payment made to plant owner ( in our case we call it as toll processing unit & toll processing charges.
26 July 2024
In the context of GST, toll processing (also known as job work) involves a process where a manufacturer provides raw materials to a third party, who processes the materials and returns the finished goods. The GST implications for toll processing charges depend on several factors, including the nature of the agreement and the services provided.
### **GST Implications for Toll Processing**
1. **Nature of Toll Processing:**
- **Job Work**: If you are providing materials to another person (the plant owner) and they process these materials using their own machinery and labor, it is classified as job work.
- **Toll Processing**: When the processing is done for a fee (e.g., ₹2.50 per kg), it is a form of job work.
2. **GST Applicability:**
- **Job Work Services**: Job work services are generally taxable under GST. The rate of GST applicable on job work services depends on the nature of the goods being processed and the category of job work.
- **Rate of GST**: Job work services related to the manufacturing of goods attract GST at various rates. For most job work services, the GST rate is 18%.
3. **Invoice and GST Payment:**
- **GST on Toll Processing Charges**: As the toll processing charges are paid for processing materials, GST is applicable on these charges. The plant owner (job worker) should issue an invoice for the toll processing charges including GST.
- **GST Rate**: The GST rate for job work services is typically 18%. However, specific job work categories might have different rates or exemptions based on the goods being processed.
4. **Reverse Charge Mechanism (RCM):**
- **Not Applicable**: In general, RCM does not apply to job work services provided by a job worker. The supplier (plant owner) will charge GST on the invoice, and you, as the recipient, will pay GST.
5. **Documentation and Compliance:**
- **Invoice**: Ensure that the plant owner provides a valid GST invoice for the toll processing charges.
- **Input Tax Credit (ITC)**: If you are registered under GST, you can claim ITC on the GST paid on toll processing charges, provided it is used for taxable supplies.
### **Example Scenario**
- **Situation**: You provide raw materials to a plant owner for processing. You pay ₹2.50 per kg as toll processing charges.
- **Plant Owner’s Invoice**:
- **Processing Charges**: ₹2.50 per kg
- **GST (18%)**: ₹0.45 per kg
- **Total Invoice Amount**: ₹2.50 + ₹0.45 = ₹2.95 per kg
**If you are registered under GST:**
- **Input Tax Credit**: You can claim ITC on the GST paid on toll processing charges.
### **Summary**
- **GST Applicability**: Yes, GST is payable on toll processing charges. The GST rate for job work services is typically 18%.
- **Invoice Requirement**: The plant owner should issue an invoice including GST.
- **ITC**: You can claim ITC on the GST paid on toll processing charges if you are registered under GST and the input is used for taxable supplies.
Ensure that you keep accurate records of all transactions and invoices for compliance with GST regulations.
### **GST Implications for Toll Processing**
1. **Nature of Toll Processing:**
- **Job Work**: If you are providing materials to another person (the plant owner) and they process these materials using their own machinery and labor, it is classified as job work.
- **Toll Processing**: When the processing is done for a fee (e.g., ₹2.50 per kg), it is a form of job work.
2. **GST Applicability:**
- **Job Work Services**: Job work services are generally taxable under GST. The rate of GST applicable on job work services depends on the nature of the goods being processed and the category of job work.
- **Rate of GST**: Job work services related to the manufacturing of goods attract GST at various rates. For most job work services, the GST rate is 18%.
3. **Invoice and GST Payment:**
- **GST on Toll Processing Charges**: As the toll processing charges are paid for processing materials, GST is applicable on these charges. The plant owner (job worker) should issue an invoice for the toll processing charges including GST.
- **GST Rate**: The GST rate for job work services is typically 18%. However, specific job work categories might have different rates or exemptions based on the goods being processed.
4. **Reverse Charge Mechanism (RCM):**
- **Not Applicable**: In general, RCM does not apply to job work services provided by a job worker. The supplier (plant owner) will charge GST on the invoice, and you, as the recipient, will pay GST.
5. **Documentation and Compliance:**
- **Invoice**: Ensure that the plant owner provides a valid GST invoice for the toll processing charges.
- **Input Tax Credit (ITC)**: If you are registered under GST, you can claim ITC on the GST paid on toll processing charges, provided it is used for taxable supplies.
### **Example Scenario**
- **Situation**: You provide raw materials to a plant owner for processing. You pay ₹2.50 per kg as toll processing charges.
- **Plant Owner’s Invoice**:
- **Processing Charges**: ₹2.50 per kg
- **GST (18%)**: ₹0.45 per kg
- **Total Invoice Amount**: ₹2.50 + ₹0.45 = ₹2.95 per kg
**If you are registered under GST:**
- **Input Tax Credit**: You can claim ITC on the GST paid on toll processing charges.
### **Summary**
- **GST Applicability**: Yes, GST is payable on toll processing charges. The GST rate for job work services is typically 18%.
- **Invoice Requirement**: The plant owner should issue an invoice including GST.
- **ITC**: You can claim ITC on the GST paid on toll processing charges if you are registered under GST and the input is used for taxable supplies.
Ensure that you keep accurate records of all transactions and invoices for compliance with GST regulations.
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