Admin[By Shaleen Shah (Partner), VNCA]
This synopsis on the aforesaid subject is based on the provisions of GST Act & Rules and Circular No. 38/12/2018-GST dtd. 26-Mar-2018.
- “Job work” means any treatment or process undertaken by a person on goods belonging to another registered person.
- The registered person on whose goods (inputs or capital goods) job work is performed is called the “Principal”.
- The registered principal may, without payment of tax, send inputs or capital goods to a job worker for job work and, if required, from there subsequently to another job worker and so on. Subsequently, on completion of the job work (by the last job worker), the principal shall either bring back the goods to his place of business or supply (including export) the same directly from the place of business/premises of the job worker within one year in case of inputs or within three years in case of capital goods (except moulds and dies, jigs and fixtures or tools).
- If the time frame of one year / three years for bringing back or further supplying the inputs / capital goods is not adhered to, the activity of sending the goods for job work shall be deemed to be a supply by the principal on the day when the said inputs / capital goods were sent out by him.
- The responsibility for sending the goods for job work as well as bringing them back or supplying them has been cast on the principal.
- The responsibility of keeping proper accounts of the inputs and capital goods sent for job work lies with the principal.
- The job worker is expected to work on the goods sent by the principal. When the job worker uses any inputs, other than the goods provided by the principal, for providing the services of job work, whether the activity is covered within the scope of job work or not would have to be determined on the basis of facts and circumstances of each case.
Requirement of registration for the principal/ job worker
- Only a registered person can send the goods for job work.
- A job worker is required to obtain registration only in cases where his aggregate turnover, to be computed on all India basis, in a financial year exceeds the threshold limit (Rs.20 Lacs / Rs.10 Lacs) regardless of whether the principal and the job worker are located in the same State or in different States.
Movement of goods
- 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.
- The inputs, semi-finished goods or capital goods being sent for job work (including that being sent from one job worker to another job worker for further job work) shall be sent under the cover of a challan issued by the principal, containing prescribed details.
- Where goods are sent by principal to a job worker, the principal shall prepare a challan in triplicate, 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.
- Where goods are sent from one job worker to another job worker, 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.
- 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.
- Where the goods are sent directly by the supplier (of the principal) to the job worker, 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. The buyer (i.e., the principal) shall issue the challan and send the same to the job worker directly, as mentioned 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 and send the same to the job worker directly.
- Where goods are returned in piecemeal by the job worker after carrying out the job work, the challan issued originally by the principal cannot be endorsed and a fresh challan is required to be issued by the job worker.
Intimation of movement of goods for Jobwork
- The principal is also required to file a Retutrn in FORM GST ITC-04 every quarter.
E-Way Bill
- An e-way bill is required to be generated if the consignment value exceeds fifty thousand rupees.
- E-way bill shall be generated either by the principal or by the registered job worker irrespective of the value of the consignment, where the goods move from one state to another.
Liability to issue invoice
- Supply of job work services: The job worker, as a supplier of services, is liable to pay GST if he is liable to be registered. He shall issue an invoice. The taxable value of job work service would include not only the service charges but also the value of any goods or services used by him for supplying the job work services, if recovered from the principal. The taxable value of job work service shall include any amount that the job worker is liable to pay in relation to the supply of job work service, but which has been incurred by the principal. Where moulds and dies, jigs and fixtures or tools have been provided by the principal to the job worker, the value thereof would be included in the value of job work services unless its value has been factored in the price for the supply of such services by the job worker.
- If the job worker is not registered, GST would be payable by the principal on reverse charge basis. However, the said provision has been kept in abeyance for the time being.
- The principal may supply, directly from the place of business / premises of a job worker, on payment of tax within India, or with or without payment of tax for exports. This facility is available to the principal only if he declares the job worker’s place of business / premises as his additional place of business or if the job worker is registered.
- The invoice would have to be issued by the principal. It is also clarified that in case of exports directly from the job worker’s place of business/premises, the LUT/bond shall be executed by the principal.
- Same principles will apply to disposal of waste and scrap generated during the job work.
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.
- Thus, the principal would issue an invoice for the same and declare such supplies in his return for that particular month in which the time period of one year / three years has expired.
- The date of supply shall be the date on which such inputs or capital goods were initially sent to the job worker and interest for the intervening period shall also be payable on the tax.
- 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. If the job worker is not registered, GST would be payable by the principal on reverse charge basis (kept in abeyance for the time being).
- There is no requirement of either returning 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.
Availability of input tax credit to the principal and job worker
- The input tax credit would be available to the principal, irrespective of the fact whether the inputs or capital goods are received by the principal and then sent to the job worker for processing, etc. or whether they are directly received at the job worker’s place of business/premises, without being brought to the premises of the principal.
- The job worker is also eligible to avail ITC on inputs, etc. used by him in supplying the job work services if he is registered.
