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CA Final · Indirect Tax Laws · Job Work

Rao Textiles Pvt. Ltd. sends cut fabric to Sai Stitching, an unregistered job worker, for stitching. During the job work, Sai Stitching generates fabric waste and scrap. Who may supply this waste and scrap on payment of tax under section 143?

Rao Textiles, the principal, may supply the waste and scrap on payment of tax. Section 143(5) lets the job worker supply scrap only if he is registered; where the job worker is unregistered, as Sai Stitching is, the supply is made by the principal.

  1. AOnly the job worker, after taking registration
  2. BThe principal, Rao Textiles, because the job worker is not registeredCorrect
  3. CNeither, since scrap generated in job work is exempt from tax
  4. DOnly the job worker, but only after the principal declares the premises as an additional place of business

Explanation

Section 143(5) allows waste and scrap generated during job work to be supplied directly by the job worker from his place of business on payment of tax if he is registered, or by the principal if the job worker is not registered. Sai Stitching is unregistered, so Rao Textiles supplies it. The scrap is not stated to be exempt.

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