Thursday, May 23, 2013

LBT on Job Work

Job Work under LBT is governed by Rule 28 (3) and Rule 28 (4), [exact wordings are mentioned at end of this post.]

The job work can be classified into two types
A - Goods coming in Thane City for Job Work
B - Goods going out of Thane City for Job Work

Here in the below diagrams and explanation - 
"Thane City" is considered as LBT area and "Mumbai" considered as area outside LBT scope (this area can be either a non LBT area or another LBT area). Now let us understand each type individually.



In this case the the goods are moved in and outside the city two times, for the first time the goods are sent outside (for processing) hence no LBT as goods are not entering city.

2nd time when good enter city, they have been processed for which they were sent. Here LBT liability arises on the value of processing carried out. If a person seds his goods for say polishing and the job worker in Mumbai charges him Rs 10,000 on the goods then LBT has to be paid on 10,000 @ rate of 5% which comes to Rs. 500.




In this case when goods first enter the city, No LBT shall be payable if following conditions are satisfied
  1. Dealer shows the value of such goods in the return of the relevant period;
  2. Dealer pays security deposit, as a guarantee, as may be determined by the Commissioner 
However, a dealer importing the goods for processing on regular basis, may make a deposit as standing deposit as may be fixed by the Commissioner from time to time.

When after processing goods are sent back, no LBT.



The exact wordings of Rule 28 (3) & (4) are as below

(3) If any goods held by a dealer or a person in the City are moved outside the City for carrying out the processes enumerated in the Explanation to this rule, and are re-imported without effecting any change in condition or appearance, as also the ownership of the goods, the value of the goods moved out, shall be allowed to be deducted from the total value of processed goods reimported and local body tax shall be leviable only on the value added i.e. processing charges, transfer charges, etc :

Provided that, the. goods are reimported within a period of six months from the date of export outside the City and the dealer furnishes the information of such export in the returns for the relevant periods.

(4) If any dealer in the City imports any goods from any place outside the city for carrying out any of the processes enumerated in the explanation under this rule, on job work basis and proves to the satisfaction
of the Commissioner that the goods processed have been exported within a period of six months from their
importation, to the same person outside the City and there had been no change in the ownership and in the
form of the goods at the time of export,  no local body tax shall be levied subject to the following conditions, namely:-
(i) that dealer shows the value of such goods in the return of the relevant period;
(ii)  the dealer pays security deposit, as a guarantee, as may be determined by the Commissioner in this behalf. However, a dealer importing the goods for processing on regular basis, may make a deposit as standing deposit as may be fixed by the Commissioner from time to time.

Explanation.-For the purpose of sub-rules (3) and (4) processing shall include-
(i) grinding, dyeing, bleaching, painting, printing, finishing, stentering, embroidering, doubling, twisting, metallising and electroplating;
(ii) building and mounting of bodies over chassis of vehicles of all kinds and shall also include such other processes as may be approved by the Commissioner, from time to time.

The decision of the Commissioner in this respect, shall  be final.

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