Job Work under GST

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Job work has been defined under Section 2(62) of the Model GST Law as “undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job worker” shall be construed accordingly”.

The expression “job work” refers to a “treatment” or “process”, which is undertaken by one person, who may or may not be registered, to another registered person.

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 a 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.

Procedure and compliance under GST

    • Goods sent for job work must be accompanied with a challan
    • Goods sent must be received back by the principal within the period:
      • Inputs, semi-finished or finished goods- 1 year
      • Capital Goods- 3 years

Of being sent out by the principal to the job worker

    • In the case where the goods sent have not been received back within the period as mentioned above, such goods will be treated as supplied to the job worker by the principal. The further tax will be required to be paid by the principal on such deemed supply.
    • The principal may on his own will
      • Receive back the goods after processing from job worker
      • Supply to his customers from the place of business of job worker

Under both the situations, ITC paid on the purchase of goods sent on job work will be allowed to the principal.

Note: In the second point of 4, Principle can supply goods from the place of business of a job working only if he declares the place of business of the job working as his additional place of business except when

i) job worker is registered/s 25 or

ii)where the principle is engaged in the supply of such goods as may be notified by the commissioner.

  • Waste and scrap generated during the initial process, intermediate process, assembly, packing or any other completion process may be sold on payment of tax by:
    • Job worker– if he holds a registration
    • Principal– if job worker does not hold a registration

ITC on Job Work

Goods purchased may be sent to the job working in the following manner:

    • 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 the cases.

  • The effective date for goods send depends on the place of business:
    • Sent from the principal’s place of business- Date of goods sent out
    • Sent Directly from the place of supply of the supplier of such good- Date of receipt by job worker
  • The goods sent must be received back by the principal manufacture within the following period:
    • Capital Goods– 3 years
    • Input Goods– 1 year

from the date(effective date) of being sent out or receipt by job worker depending on the place of business from where goods are sent

  • In case goods are not received within the period as mentioned in point 3, such goods will be treated as supply from the effective date and tax will be payable on such deemed supply and the challan issued will be treated as an invoice for such supply

Transition provisions

  • Inputs, semi-finished goods or finished goods removed for job work for carrying certain processes and returned on or after the appointed date.
  • In case any inputs or semi-finished goods had been removed before the appointed date from the factory of the manufacturer and sent to a job worker for carrying further processing, testing, repair or for a similar purpose, and the same is returned to said place of manufacturer on or after the appointed date, no tax shall be payable if the following conditions are satisfied:
    • Underlying goods are returned to the factory within 6 months from the appointed date (extendable for a maximum period of 2 months).
    • Declaration of the goods held by the job worker is done in a specified form and manner
    • Supply of semi-finished goods or finished goods is done only on payment of tax in India or the goods are exported out of India within 6 months from the appointed date (extendable by not more than 2 months).

If the underlying inputs, semi-finished goods or finished goods are not returned within 6 months or extended period, ITC availed earlier under existing laws will be recovered

Conditions and restrictions for claiming Input Credit on Job work

  • Inputs, semi-finished goods or capital goods send on job work
    • From the principal’s place of business
    • Directly from the place of supply of the supplier of such goods

must be dispatched along with a challan

  • 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
  • The details of challan must be shown in FORM GSTR-1
  • Details of goods/capital goods sent to a job worker and received back must be filed through Form GST ITC – 4

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