Job Work under GST: Sec 2(68) “Job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly. Thus Job work means undertaking any treatment or process by a person on goods belonging to another registered taxable person. The person who is treating or processing the goods belonging to other person is called ‘job worker’ and the person to whom the goods belong is called ‘principal’
Section 2 (88) – Definition of Principal : “principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both.
In the age of outsourcing, it is common to get certain operations done from another person. This latter person may carry out either a part of the process allowing its completion by another person or by the person sending the goods or may himself complete the goods. Such operations are called job work operations. The person sending the goods is known as principal and that carrying out the operation is known as job worker.
While treatment and processing are commonly understood as services, there is no implication that job work is purely services, or that goods would not be used for such treatment or processing. However, Schedule II of the CGST Act which specifies activities to be treated as supply of goods or supply of services, inter alia provides that any treatment or process which is applied to another person’s goods is a supply of services. Such a deeming fiction in respect of job work is given effect to, based on the primary objective of any job work, which is to provide a service….
Job Work under GST
Registration of place of business of Job worker as Additional place of business
by Principal.
If the principal intends to supply job worked inputs and/or capital goods from the place of job worker itself, the principal will have to declare the place of business of the job-worker as his additional place of business in case the job worker is not registered.
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after job work, from the place of job worker without declaring the place of business of the job worker as his additional place of business
Intimation to department for sending the goods for job work.
Principal sending goods for job work will have to intimate to the department about his intention to send inputs for job work.
Conditions and restrictions for claiming Input Credit on Job work
A. Inputs, semi-finished goods or capital goods send on job work from principal’s place of business Directly from the place of supply of the supplier of such goods must be dispatched along with a challan. Challan must be issued by principal even for goods and capital goods directly sent to job worker.
B. The challan issued must include the following particulars:
- Date and number of the delivery challan
- Name, address and GSTIN of the consigner and consignee
- HSN code, description and quantity of goods
- Taxable value, tax rate, tax amount- CGST, SGST, IGST, UTT separately -Place of supply and signature
C. The details of challan must be shown in FORM GSTR-1 and Details of goods/capital goods sent to job worker and received back must be filed through Form GST ITC – 4
Removal of goods to job worker without payment of duty by Principal.
The GST law suspends the levy of GST for goods sent for job work. The input goods are required to be returned within one year and the capital goods are required to be returned within three years of the date of sending it for job work. However, in the case of capital goods in the nature of moulds, dyes, jigs, fixtures or tools, it is not necessary to receive back these goods.
Whether goods sent by a taxable person to a Job Worker will be treated as supply and liable to GST? If yes, why?
It shall be regarded as supply because supply includes all forms of supply such as sale, transfer, etc. and also includes cases where the conditions as specified in section 143 of the CGST Act, 2017 are not met. Accordingly, the supply by principal to job worker and vice-versa will be treated as supply and liable to GST.
However, it is shall not be regarded as supply if the conditions as specified in section 143 of CGST Act, 2017 are satisfied. As the deeming provision contained in section 143(3) to treat the goods sent by the principal to job worker as supply is applicable only when the condition of section 143 with respect to receiving back the goods within the stipulated period is not satisfied.
Whether the Job worker is liable to pay GST under reverse charge mechanism on the goods or services if notified?
Yes. In terms of section 9(3) of CGST Act, 2017 on the specified categories of supply of goods and/or services, the recipient of such goods and/or services is liable to pay GST under reverse charge basis. Further, Section 143 of CGST Act, 2017 does not provide any exemption to job worker in this regard.
Is a job-worker required to take registration?
Yes, as a Job-worker would be a supplier of services, he would be required to obtain registration if his aggregate turnover exceeds the prescribed threshold.
Whether the goods of principal directly supplied from the job-worker’s premises will be included in the aggregate turnover of the Job Worker?
No. Since the responsibility for accountability of inputs and/ or capital goods lies with principal, it will be included in the aggregate turnover of the principal as enumerated in section 143 of CGST Act, 2017.
What are the provisions relating to availment of input tax credit by the principal in respect of inputs sent to a Job Worker?
In the CGST Act, 2017, aspects relating to availment of input tax credit in respect of inputs sent for job-work have been specifically dealt with in Section 19, which provides that the principal shall be entitled to avail credit of inputs sent to a job-worker if the said inputs, after completion of jobwork or otherwise are received back within a period of one year from the date of being sent to a job worker.
In case the inputs are sent directly to the job-worker, the date shall be counted from the date of receipt of inputs by job-worker. Further, if such inputs are not received back within a period of one year then it shall be deemed that such inputs have been supplied by the principal to the job worker on the day when the said inputs were sent out.
Whether the principal is required to raise a taxable invoice in case of goods sent to job worker is deemed as supply in terms of section 143(3)/143(4)?
Yes the principal is required to raise a taxable invoice on the day immediately after the expiry of the one year or three years period for inputs or capital goods as the case may be.
Whether ITC can be taken in respect of moulds & dies, jigs & fixtures, or tools sent to a Job Worker?
Yes. Further, there is no time limit prescribed to receive back such goods from job worker, as Section 143(4) specifically excludes moulds & dies, jigs & fixtures, or tools.
Should job worker and principal be located in same State or Union territory?
No, this is not necessary as provisions relating to job work have been adopted in the IGST Act as well as in UTGST Act and therefore job-worker and principal can be located either in same State or in same Union Territory or in different States or Union Territories.
What are the implications of GST on the principal manufacturer in respect of goods sent on job work before the appointed date and received within 6 months from the appointed date?
In case the goods are returned within 6 months from the appointed date, no tax shall be payable by the original supplier. In case the goods are returned after 6 months from the appointed date, the input tax credit claimed by the original supplier shall be recovered in terms of clause (a) of sub-section (8) of section 142. In either case, both the principal manufacturer and job worker shall declare the details of goods held in stock by the job worker as on the appointed date in the prescribed form
Who is liable to pay tax when the processed inputs are not returned within the time limit specified?
When the processed inputs are not returned within specified time limit, the principal manufacturer is liable to reverse the input tax credit already claimed, which shall be reversed under the GST law.
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