Job-work transactions under model GST law

In today's scenario, where the demand for goods and services is increasing at a rapid pace, a large number of industries as a part of their survival strategy are dependent on outside support for completing their manufacturing activities. Such activities are being undertaken by many small and medium scale industries to complete the process on raw material/semi-finished goods as desired by principal manufacturer and is known as "Job-Work". Job-work is otherwise also understood as the processing or working on goods supplied by the principal (i.e. the manufacturer) so as to complete a part or whole of the process. The principal usually sends the raw material or semi-finished goods or components which are processed by the job worker resulting in a further processed or finished product. The manufacturer may also send finished product to a job worker for assembling/packing. The term job-work has various synonyms in various industries – "job-work" or "sub-contracting" in engineering industry, "processing" in chemical or textile industry and "a loan licensee" in pharmaceutical industry, "contract manufacturing" in FMGC industry.

This being the commercial aspects of the entire transaction, the Indirect tax aspects broadly revolves around Central Excise Duty, Service tax and Value Added Tax/Central Sales Tax. The taxable events for all three taxes are different i.e. for Central Excise duty it is upon manufacture of goods, for Service tax it is rendition of service and for Value Added Tax/Central Sales Tax it is sale of goods.

Govt. allows 100% FDI in e-commerce, aviation and defense

With the objective of providing major impetus to employment and job creation in India, the Government has brought major FDI policy reforms in a number of sectors viz. Defence, Construction Development, Insurance, Pension Sector, Broadcasting Sector, Single Brand Retail Trading, Manufacturing Sector, LLPs, Civil Aviation, Credit Information Companies, Satellites- establishment/operation and Asset Reconstruction Companies. These amendments seek to further simplify the regulations governing FDI in the country and make India an attractive destination for foreign investors. The Key highlights of amended FDI policy are as follows:

1. Foreign Investment in Defence Sector up to 100%: Foreign investment beyond 49 % has now been permitted through government approval route, in cases resulting in access to modern technology in the country or for other reasons to be recorded. The condition of access to ‘state-of-art’ technology in the country has been done away with. 

2. FDI in Civil Aviation sector: Govt. has allowed 100% FDI in aviation sector under automatic route in Greenfield Projects and 74% FDI in Brownfield Projects under automatic route.

3. Changes for promoting Food Products manufactured/produced in India: It has now been decided to permit 100% FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India. 

4. Private Sector Agencies: The extant policy permits 49% FDI under government approval route in Private Security Agencies. FDI up to 49% has now been permitted under automatic route in this sector and FDI beyond 49% and up to 74% would be permitted with government approval route.