Simplified GST Series –Miscellaneous- Section 143/CGST ACT 2017
Section 143-Job Work Procedure
♣ This section provides for a special procedure to exempt supplies from payment of GST by a principal to a job worker and return from a job worker to a principal subject to certain conditions and procedures.
♣ The definition of job work contains three important phrases, namely:
√ treatment or process – any treatment or process which is applied to another person’s goods is a supply of services. Therefore, the services provided by the job-worker will be classified under HSN 9988 and treated as supply of services.
√ goods belonging to another person-A reasonable approach demands that at least one, if not more, of the primary material must be provided by the principal where the intention is to secure the services of treatment or process – offered by the job worker to be expended on these primary materials of the principal.
√ such person being a registered person-this is very interesting that unless the principal is himself already registered, the entire transaction will fail to be job work.
√ Rule 55 of CGST Rules provides that transaction of goods sent for job work can be without an invoice, but a proper delivery challan containing specific details must be issued while sending goods to the job worker.serial number of such delivery challan shall also be provided in Table13 of GSTR 1.
√ After the processing of goods or otherwise, the goods may be dealt with in any of the following manner by the principal within 1 year/ 3 years or such further period as extended by the commissioner-
(a) Brought back to any place of business without payment of tax and thereafter supplied,
(i) Within India on payment of tax,
(ii) For export – with or without payment of tax,
(b) Supply from the place of business of job worker –
(i) Within India on payment of tax,
(ii) For export – with or without payment of tax,
√ Direct Supply of goods from job worker
The goods can be supplied directly from the place of business of job worker by the principal only when the principal declares the place of business of the job worker as his additional place of business. However, the exceptions are –
(i) If job worker is registered under Section 25;
(ii) The principal is engaged in the supply of notified goods
√ Responsibility for accountability of Inputs/ Capital Goods
The principal is responsible and accountable for keeping proper accounts of the inputs or capital goods and for all the transactions between him and the job worker.
√ Inputs sent to Job Worker not received back within one year or such extended period by the commissioner
As per section 143(3), where the inputs sent for job-work are not received back by the “principal” after completion of “job-work or otherwise” or are not supplied from the place of business of the job worker as aforesaid within a period of one year of their being sent out or such extended period to a maximum of one year, it shall be deemed that such inputs had been supplied by the principal to the job-worker on the day when the said inputs were sent out.
Hence, the Principal would be liable to pay GST along with interest from the date inputs were sent out.
As per CGST Amendment Act 2018, this period of one year can be extended up to further period of up to one more year by commissioner if taxpayer has shown sufficient reason for doing the same.
Capital Goods Sent to Job Worker not received back within three years or such extended
As per section 143(4), where the capital goods, other than moulds and dies, jigs and fixtures, ortools, sent for job-work are not received back by the “principal” or are not supplied from the place of business of the job worker as aforesaid within a period of three years of their being sent out or such extended period to a maximum of two years, it shall be deemed that such capital goods had been supplied by the principal to the job-worker on the day when the said capital goods were sent out. Hence, the Principal would be liable to pay GST along with interest from the date capital goods were sent out.
It is also important to note that the requirement of bringing back the goods sent to the job worker is not applicable on moulds and dies, jigs and fixtures, or tools. Hence such items may remain with the job worker.
As per CGST Amendment Act 2018, this period of three years can be extended up to further period of up to two more years by commissioner if taxpayer has shown sufficient reason for doing the same.
Waste and Scrap generated at Job workers’ premises
As per section 143(5), any 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. Aspects relating to taking input tax credit in respect of inputs/capital goods sent for job-work have been specifically dealt in Section 19, which provides that the credit of taxes paid on inputs or capital goods can be taken in the specified manner.
Amortization of capital goods issued free-of-charge
Principal wants job worker to process the goods as per their customization and for that purpose, principal sends certain capital goods viz. Moulds and dies, jigs and fixtures or tools which are used in the process of Job working having short span of life and bound to be Wiped out during that process. By nature, such goods are regarded as capital goods for principal but similarly its very rare that such goods remain intact after certain period. Accordingly, even though such goods are issued free of charge to job worker, the same need not be returned back within stipulated time as mentioned in section 143(4).
Eligibility of Input tax credit in the hands of Principal:
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. Since ownership of such goods will remain with principal, this is not called permanent transfer of business assets and not falls in Schedule-I transaction. Principal can claim ITC on such free supplied goods.
Queries /doubts related to above mailed at [email protected]
Author Bio
if principle manufacture is pay output tax if goods are not return from jobworker.
if the said goods received after one year then principle manufacture will take re-credit of ITC which was reversed /pay tax ? or what is procedure for sending material and claiming of ITC on the same.