Job Work Under GST

Introduction 

The concept of job work already exists in Central Excise, wherein a principal manufacturer can send inputs or semi-finished goods to a job worker for further processing. Many facilities, procedural concessions have been given to the job workers as well as the principal supplier who sends goods for job work. 

The whole idea is to make principal responsible for meeting compliances on behalf of the job worker on the goods processed by job worker, considering the fact that typically the job- workers are small persons who are unable to comply with the discrete provisions of the law. 

The GST Act makes special provisions with regard to removal of goods for job-work and receiving back the goods after processing from the job worker without payment of GST. The benefit of these provisions shall be available to both the principal and the job worker. 

The provisions in regard to job work are contained under Section 143 of the CGST Act, 2017 and Rule 45 of the CGST Rules, 2017. 

Meaning of Job work 

Section 2(68) of the CGST Act, 2017 defines job work as ‘any treatment or process undertaken by a person on goods belonging to another registered person’. 

The one who does the said job would be termed as ‘job worker’. 

The ownership of the goods does not transfer to the job worker but it rests with the principal. 

The job worker is required to carry out the process specified by the principal, on the goods. 

Procedural aspects related to 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 dispatched 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 credit 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. 

d) After processing of goods, the job worker may clear the goods to- 

(i) Another job worker for further processing; 

(ii) Dispatch the goods to any of the place of business of the principal without payment of tax; 

(iii) Remove the goods on payment of tax within India or without payment of tax for export outside India on fulfilment of conditions. 

The facility of supply of goods by 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 premise 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 additional place of business is not required. 

Before supply of goods to job worker, principal would be required to intimate the Jurisdictional Officer containing the details of 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 10of the Invoice Rules.

The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal. 

Section 19 of the CGST Act, 2017

Input Tax credit on goods supplied to job worker 

The principal (a person supplying taxable goods to the job worker) shall be entitled to take the credit of input tax paid on inputs sent to the job- worker for the job work. 

Further, the Proviso also provides that the principal can take the credit even when the goods have been directly supplied to the job worker without bringing into the premise of the principal. The principal need not wait till the inputs are first brought to his place of business. 

Time Limits for return of processed goods 

Inputs and capital goods after processing shall be returned back to principal within one year or three years respectively of their being sent out. Further, the provision of return of goods is not applicable in case of moulds and dies, jigs and fixtures or tools supplied by the principal to job worker. 

Section 143 of the CGST Act, 2017

Extended meaning of input 

As per the explanation, where certain process is carried out on the input before removal of the same to the job worker, such product after carrying out the process to be referred as the intermediate product. Such intermediate product can also be removed without the payment of tax. Therefore, both input and intermediate product can be cleared without payment of duty to job worker. 

Waste clearing provisions 

Waste generated at the premises of the job worker may be supplied directly by the registered job worker from his place of business on payment of tax or s such waste may be cleared by the principal, in case the job worker is not registered.

Violation of conditions laid down in section 143

If the inputs or capital goods (other than moulds and dies, jigs and fixtures or tools) are neither received back by the principal nor supplied from the job worker’s place of business within the specified time period, the inputs or capital goods (other than moulds and dies, jigs and fixtures or tools) would be deemed to have been supplied by the principal to the job worker on the day when such inputs or capital goods were sent out to the first job worker. If such goods are returned by the job worker after the stipulated time period, the same would be treated as a supply by the job worker to the principal and the job worker would be liable to pay GST if he is liable for registration in accordance with the provisions contained in the CGST Act read with the Rules made thereunder. Further, there is no requirement of either returning back or supplying the goods from the job worker’s place of business/premises as far as moulds and dies, jigs and fixtures, or tools are concerned.— Circular No. 38/12/2018, dated 26-3-2018, as amended by, Circular No. 88/7/2019, dated 1-2-2019.

Relevant Circulars in regard to Job work 

Movement of goods from the principal to the job worker and the documents and intimation required therefor: 

(i) Where goods are sent by principal to only one job worker

The principal shall prepare in triplicate, the challan in terms of Rules 45 and 55 of the CGST Rules, for sending the goods to a job worker. Two copies of the challan may be sent to the job worker along with the goods. The job worker should send one copy of the said challan along with the goods, while returning them to the principal. The Form GST ITC04 will serve as the intimation as envisaged under section 143 of the CGST Act, 2017. 

(ii) Where goods are sent from one job worker to another job worker

In such cases, the goods may move under the cover of a challan issued either by the principal or the job worker. In the alternative, the challan issued by the principal may be endorsed by the job worker sending the goods to another job worker, indicating therein the quantity and description of goods being sent. The same process may be repeated for subsequent movement of the goods to other job workers. 

(iii) Where the goods are returned to the principal by the job worker

The job worker should send one copy of the challan received by him from the principal while returning the goods to the principal after carrying out the job work. 

(iv) Where the goods are sent directly by the supplier to the job worker

In this case, the goods may move from the place of business of the supplier to the place of business/premises of the job worker with a copy of the invoice issued by the supplier in the name of the buyer (i.e. the principal) wherein the job worker’s name and address should also be mentioned as the consignee, in terms of Rule 46(o) of the CGST Rules. The buyer (i.e., the principal) shall issue the challan under Rule 45 of the CGST Rules and send the same to the job worker directly in terms of para (i) above. In case of import of goods by the principal which are then supplied directly from the customs station of import, the goods may move from the customs station of import to the place of business/premises of the job worker with a copy of the Bill of Entry and the principal shall issue the challan under Rule 45 of the CGST Rules and send the same to the job worker directly. 

(v) Where goods are returned in piecemeal by the job worker

In case the goods after carrying out the job work, are sent in piecemeal quantities by a job worker to another job worker or to the principal, the challan issued originally by the principal cannot be endorsed and a fresh challan is required to be issued by the job worker. 

(vi) Submission of intimation

It is the responsibility of the principal to include the details of all the challans relating to goods sent by him to one or more job worker or from one job worker to another and its return therefrom. The Form GST ITC-04 will serve as the intimation as envisaged under section 143 of the CGST Act.—Circular No. 38/12/2018, dated 26-3-2018, as amended by, Circular No. 88/7/2019, dated 1-2-2019. 

Supply of goods by the principal from job worker’s place of business/ premises

The supply of goods by the principal from the place of business/premises of the job worker will be regarded as supply by the principal and not by the job worker as specified in section 143(1)(a) of the CGST Act.—Circular No. 38/12/2018, dated 26- 3-2018, as amended by, Circular No. 88/7/2019, dated 1-2-2019. 

Job work provisions applicable to a registered person

The provisions of Section 143 of the CGST Act are applicable to a registered person. Thus, it is only a registered person who can send the goods for job work under the said provisions. It may also be noted that the registered person (principal) is not obligated to follow the said provisions. It is his choice whether or not to avail or not to avail of the benefit of these special provisions.— Circular No. 38/12/2018, dated 26-3-2018, as amended by, Circular No. 88/7/2019, dated 1-2-2019.