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CA Final · Indirect Tax Laws · Job Work

Nirmal Pharma Ltd sent raw materials to an unregistered job worker, Sunil, on 1 March 2025. Sunil converted them into intermediate goods and sent them to a second job worker for further processing, where they arrived on 1 September 2025. The intermediate goods and also waste and scrap arose during job work. Which statement is correct under the job work provisions?

Because the job worker is unregistered, waste and scrap generated during job work is supplied by the principal on payment of tax. Intermediate goods count as inputs, and the principal retains responsibility for keeping proper accounts even when goods move to further job workers.

  1. AIntermediate goods are not treated as inputs, so the one-year period does not apply to them
  2. BWaste and scrap from Sunil's unregistered premises can be supplied by Nirmal, the principal, on payment of taxCorrect
  3. CWaste and scrap can be supplied by Sunil directly even though he is unregistered, on payment of tax
  4. DMoving goods to a second job worker ends the principal's responsibility for accounts

Explanation

Inputs include intermediate goods arising from treatment or process by the principal or job worker, so the one-year rule covers them. Waste and scrap may be supplied by the job worker from his place if registered, or by the principal if the job worker is unregistered. Sunil is unregistered, so Nirmal supplies it. Responsibility for accounts always remains with the principal.

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