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CA Final · Indirect Tax Laws · Job Work

Meera Textiles Ltd sent a capital good (a machine) to a job worker on 1 April 2023 under the job work procedure without payment of tax. The machine has not been received back by 1 April 2026, and the Commissioner has not extended the period. Which statement is correct?

The machine is deemed supplied by Meera Textiles to the job worker on 1 April 2023, the day it was sent out, because it was not received back or supplied within three years and no extension was granted.

  1. AThe machine is deemed supplied by Meera to the job worker on 1 April 2023Correct
  2. BThe machine is deemed supplied on 1 April 2026, when the three-year period ends
  3. CNo deemed supply arises because capital goods have no time limit
  4. DDeemed supply arises only if the job worker is unregistered

Explanation

For capital goods other than moulds and dies, jigs and fixtures, or tools, the limit is three years from being sent out. If not received back or supplied within that period, they are deemed supplied on the day they were sent out, i.e. 1 April 2023. The 2026 date is a common error, as it is the expiry date, not the deemed supply date.

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