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CA Final · Indirect Tax Laws · Job Work

Sharma Auto Components Ltd, a registered principal, sends 500 kg of steel bars (inputs) on 1 June 2025 directly from its supplier's premises to the premises of a job worker, who receives them on 5 June 2025. The steel is neither received back nor supplied from the job worker's premises by 4 June 2026. Which statement is correct under the CGST Act, 2017?

The one-year period runs from 5 June 2025, when the job worker received the steel, because for inputs sent directly the period is counted from receipt by the job worker. It therefore ends on 5 June 2026, and no deemed supply has arisen by 4 June 2026.

  1. AThe one-year period is counted from 1 June 2025, the date the goods were sent out by the supplier, so the deemed supply arose on 1 June 2026
  2. BThe one-year period is counted from 5 June 2025, the date of receipt by the job worker, so the period has not yet expired on 4 June 2026Correct
  3. CThe period is three years because the steel is sent directly to the job worker
  4. DThe principal loses the right to take input tax credit on the steel from the outset because it was not first brought to his place of business

Explanation

Where inputs are sent directly to a job worker, the proviso to section 19(3) counts the one-year period from the date the job worker receives them. That date is 5 June 2025, so the year ends on 5 June 2026 and the deemed supply has not yet arisen on 4 June 2026. Option A uses the dispatch date, which is wrong for direct dispatch. Section 19(2) also allows credit even if inputs go directly to the job worker.

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