Job Work Under GST is defined as any treatment or process undertaken by a person on goods belonging to another person. This includes activities such as manufacturing, repairing, altering, cleaning, or testing of goods.
What is job work?
Job work means processing or working on raw materials or semi-finished goods supplied by the principal manufacturer to the job worker.
This is to complete a part or whole of the process which results in the manufacture or finishing of an article or any other essential operation.
For example, big shoe manufacturers (principals) send out half-made shoes (upper part) to smaller manufacturers (job workers) to fit in the soles.
The job workers send back the shoes to the principal manufacturer As per GST Act, job work means any treatment or process undertaken by a person on goods belonging to another registered person.
The person doing the job work is called a job worker.
Note: The value of goods sent by the principal will not be included in the aggregate turnover of the registered job worker.
Procedure of Job-work
Certain facilities with certain conditions are offered in relation to Job-work, some of which are as under:
(a) A registered person (Principal) can send inputs/capital goods under intimation and subject to certain conditions without payment of tax to a job worker and from there to another job-worker and after completion of Job-work bring back such goods without payment of tax.
The principal is not required to reverse the ITC availed on inputs or capital goods sent to job-worker.
(b) Principal can send inputs or capital goods directly to the job-worker without bringing them to his premises, still the principal can avail the ITC of tax paid on such inputs or capital goods.
(c) However, inputs and/or capital goods sent to a job worker are required to be returned to the principal within 1 year and 3 years, respectively, from the date of sending such goods to the job-worker [the period of one year and three years may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.]
(d) After processing of goods, the job-worker may clear the goods to- another job-worker for further processing; send the goods to any of the places of business of the principal without payment of tax; remove the goods on payment of tax within India or without payment of tax for export outside India on fulfillment of specified conditions.
The facility of supply of goods by the principal to the third party directly from the premises of the job-worker on payment of tax in India likewise with or without payment of tax for export may be availed by the principal on declaring premises of the job-worker as his additional place of business in registration. In case the job-worker is a registered person under GST, even declaring the premises of the job worker as an additional place of business is not required.
Before the supply of goods to the job worker, the principal would be required to intimate the Jurisdictional Officer containing the details of the description of inputs intended to be sent by the principal and the nature of processing to be carried out by the job-worker. The said intimation shall also contain the details of another job-worker if any.
The inputs or capital goods shall be sent to the job-worker under the cover of a challan issued by the principal. The challan shall be issued even for the inputs or capital goods sent directly to the job-worker.
The challan shall contain the details specified in Rule 55(1) of the CGST Rules, 2017.
ITC on goods sent for job work
The principal manufacturer will be allowed to take credit of tax paid on the purchase of goods sent on job work. However, there are certain conditions.
A. Goods can be sent to job worker
- From the principal’s place of business
- Directly from the place of supply of the supplier of such goods
ITC will be allowed in both cases.
B. Effective date for goods sent depends on the place of business
- Sent from principal’s place of business- Date of goods sent out
- Send directly from the place of supply of the supplier of such goods- Date of receipt by job worker
Effective date is important because it will help to determine the point of taxation if the goods are not returned back within the specified time (see point C below)
C. The goods sent must be received back by the principal manufacture within the following period
- Capital Goods- 3 years
- Input Goods- 1 year
D. In case goods are not received back within the period mentioned above, such goods will be treated as supply from the effective date and tax will be payable by the prinicpal
Accounts & records
The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal.
- All goods sent for job work must be accompanied by a challan.
- The challan will be issued by the principal.
- It will be issued even for the inputs or capital goods sent directly to the job-worker.
- The details of challans must be shown in FORM GSTR-1.
- Details of challans must also be filed through Form GST ITC – 04.
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, UTGST separately
- Place of supply and signature
FORM GST ITC-04 must be submitted by the principal every quarter. He must include the details of challans in respect of the following-
- Goods dispatched to a job worker or
- Received from a job worker or
- Sent from one job worker to another
It must be furnished on or before 25th day of the month succeeding the quarter.