Job Work Procedure and Compliances under GST

Introduction:

Job work means processing of goods supplied by the principal. Resultant product can be a finished good, Raw material for principal. The term Job work also exists in Central excise, wherein principal manufacturer can send inputs or semi-finished goods to job worker for further processing. Let see the provisions mentioned in GST for Job work.

Definitions:

As per Section 2(68) of CGST Act, 2017, “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 Job worker is supposed to carry out process as required by the principal.

As per Section 2(88) of CGST Act, 2017, “principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both;

As per Sec 2 (5) “agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another;

Job work Procedure under GST:

Principal may under intimation and under the cover of challan issued by the principal as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and after completion of job may bring back such goods without payment of tax.

Supply such inputs/ capital goods after completion of job work or otherwise within 1 year/3 years of there being sent out, from the place of business of a job worker on payment of tax within India or without payment of tax for export.

Note:- The condition of bringing back capital goods within 3 years is not applicable to moulds, dies, jigs and fixtures or tools.

It is to be noted that, the principal can supply the goods directly from the premises of job worker without bringing it back to his own premises, but the principal should have declared the premises of an unregistered job worker as his additional place of business.

The principal can directly supply goods from job worker’s premises without declaring the premises of job worker as his additional place of business only in two circumstances namely:-

1. If the job worker is a registered person ;

2. Where the principal is engaged in supply of those goods as may be notified by the commissioner.

The Challan issued by the principal to the Job worker shall contain the following details:

1. Delivery challans shall be serially numbered not exceeding 16 characters
2. name, address and Goods and Services Tax Identification Number of the consigner, if registered;
3. Harmonized System of Nomenclature code and description of goods;
4. name, address and Goods and Services Tax Identification Number or Unique Identity Number of the consignee, if registered;
5. quantity (provisional, where the exact quantity being supplied is not known);
6. taxable value
7. tax rate and tax amount – central tax, State tax, integrated tax, Union territory tax or cess, where the transportation is for supply to the consignee;
8. Place of supply, in case of inter-State movement; and
9.  Signature.

The delivery challan shall be prepared in triplicate, in case of supply of goods, in the following manner, namely:–

a) the original copy being marked as ORIGINAL FOR CONSIGNEE;

b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and

c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNER.

Input Tax credit on Goods supplied to Job worker

As per section 19 (1) of CGST Act, Principal can take the credit of Input tax paid on inputs sent to the job worker for Job work. As per Section 19 (4), Principal shall also be take the credit of Input tax paid on Capital goods sent to the job worker for Job work

Compliances with respect to the Inputs, capital goods supplied to the Job work

The details of challans in respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another during a quarter shall be included in FORM GST TC-04 furnished for that period on or before the twenty-fifth day of the month succeeding the said quarter.

Where the inputs or capital goods are not returned to the principal within the time stipulated in section 143, it shall be deemed that such inputs or capital goods had been supplied by the principal to the job worker on the day when the said inputs or capital goods were sent out and the said supply shall be declared in FORM GSTR-1 and the principal shall be liable to pay the tax along with applicable interest.

Transitional provisions relating to job work:

 Where any inputs received at a place of business had been removed as such or removed after being partially processed to a job worker for further processing, testing, repair, reconditioning or any other purpose in accordance with the provisions of existing law prior to the appointed day and such inputs are returned to the said place on or after the appointed day, no tax shall be payable if such inputs, after completion of the job work or otherwise, are returned to the said place within six months from the appointed day.

Where any semi-finished goods had been removed from the place of business to any other premises for carrying out certain manufacturing processes in accordance with the provisions of existing law prior to the appointed day and such goods (hereafter in this section referred to as “the said goods”) are returned to the said place on or after the appointed day, no tax shall be payable, if the said goods, after undergoing manufacturing processes or otherwise, are returned to the said place within six months from the appointed day:

For these purpose, manufacturer and job workers need to declare the details of the inputs or goods held in stock by the job worker on behalf of the manufacturer on the 1^st July 2017 within ninety days in Form GST TRAN 1. Form shall be filed electronically.

Provisions for Waste generated at the Job work location

Waste and scrap generated during the job work may be supplied by the job worker directly from his place of business on payment of tax, if such job worker is registered, or by the principal, if the job worker is not registered.

Accounting at Job worker: 

Job work charges is treated as a service as per Schedule II (3) will attract GST in case of threshold limit crosses. 

the supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker; 

( CA Vaibhav Samdani, +919665933598 , http://sraindia.co.in/contact-us/ )