Manoharan & Sons, a registered person, sends certain category of yarn for processing to the job worker in January. The job worker undertakes the…

CA Final · Indirect Tax Laws · MTP · January 2026
Manoharan & Sons, a registered person, sends certain category of yarn for processing to the job worker in January. The job worker undertakes the processing work on the yarn as per the requirement of Manoharan & Sons. During the process, the job worker uses his own material also. The processed yarn is sold by Manoharan & Sons directly from the job worker's premises in the month of March. The balance quantity of yarn and waste material is sent back by the job worker to Manoharan & Sons in April. The accountant of job worker is of the opinion that since the job worker is using his own material also in the processing, the supply being made by it to Manoharan & Sons is in the nature of supply of goods as well as services. Do you agree with the opinion of accountant of the job worker?

Suggested Answer and Working Notes:

(b) No, the opinion of the accountant of the job worker is not correct. Section 7(1A) of the CGST Act, 2017 provides that when certain activities or transactions constitute a supply in accordance with the provisions of section 7 (1) , they shall be treated either as a supply of goods or supply of services as referred to in Schedule II. Any processing activity carried on any other person's goods is treated as supply of service in terms of Schedule II. Circular No. 38/12/2018 GST dated 26.03.2018 has also clarified that the job worker, in addition to the goods received from the principal, can use his own goods for providing the services of job work. These goods are not supply per se, but are being used in the processing activity carried out by it. Thus, the activity undertaken by the job worker, in the given case, squarely falls within the purview of Schedule II and shall be considered as supply of service by the job worker to Manoharan & Sons.

Topics: Job Work

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