Section 20 of revised Model Law provide for the input tax credit in respect of goods sent for job work. Salient features of the scheme of input tax credit on goods sent for job work are as follows.Provisions for removal of inputs and capitals goods without payment of tax are covered by section 55.

Treatment of Inputs sent for job work:  

1. Input Tax Credit is available on both inputs as well as capital goods.
2. Principal is eligible to take credit of input even if goods are sent directly to the place of job worker. Even if without being entered into the premises of principal.
3. In case of inputs principal have two options. First he can receive them back to his place within one year. Second he can supply them from the place of job worker. If the principal neither receive the inputs back or supply them from the place of job worker within one year of their being sent out. It will be deemed that the inputs were supplied by the principal to the job worker when they were sent out.
4. In case the goods were sent directly to the place of job worker. The period of one year will be calculated form the date of receipt of goods by the job worker.

Treatment of capital goods sent for job work: 

1. The “principal” shall be entitled to take credit of input tax on capital goods. Principal will be still eligible  if the capital goods are directly sent to a job worker for job-work. Even if the goods are sent to job worker without their being first brought to his place of business.
2. Where the capital goods sent for job-work are not received back by the “principal” within a period of three years of their being sent out. It shall be deemed that such capital goods had been supplied by the principal to the job-worker on the day when the said capital goods were sent out.
3. where the capital goods are sent directly to a job worker, the period of three years shall be counted from the date of receipt of capital goods by the job worker.
4. Moulds and dies, jigs and fixtures, or tools sent to a job-worker are exempted from receipt back or supply.
5. It is important that section 55 provide for supply of capital goods also from the place of job worker. But in section 20 there is no mention about the supply of capital goods from the place of job worker. In case of capital goods sent for job work and not received back.It will be deemed that they were supplied by the principal on the day they were so removed. Principal in this case will be liable to pay tax, interest and penalty as applicable.