As word define itself that goods whether input or capital goods supplied by principal for further processing.
As per Section 2(68) of 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 goods is not transferred to the job worker as it remains with Principal supplier (who send the goods to job worker).
In context of Registration
For Principal Supplier:
Procedure of Job work is given u/s 143 of CGST Act and the provisions of the said section is applicable only on registered person. Hence person who send the goods on job work must be a registered person to be covered under this section.
For Job Worker:
In this case first we check whether job worker is making inter or intra state supply. In case of intra state supply when he cross the threshold limit of Rs.20 lakh (Rs.10 lakh in case of special category states; Manipur, Mizoram, Tripura, Nagaland) he is required to take registration as per section 22 of CGST Act 2017. Even If the job worker is involved in making inter- state supply then he is required to take compulsory registration as per section 24 of CGST Act 2017 however government has made special provisions and has given a relief to such suppliers of services, as per section 23(2) [CBIC Circular No.38/12/2018 dated 26.3.2018] supplier of service is required to obtain registration when he crosses the threshold limit.
Note: Limit of Rs.40 lakhs comes into light dated 7.3.2019 vide notification no. 10/2019 is not applicable on supply of services and said limit is available only for supply of goods.
Procedure of Job Work
Since goods were sent on temporary basis by a principle to job worker without consideration so government wants to ensure that such supply is not permanent transfer of asset as per Schedule I u/s 7 of CGST Act which says that if supplier transfer business assets on permanent basis even without consideration, the transaction qualifies as supply and shall be liable to GST. So for this; provision of section 143 of CGST act should be complied with.
Section 143 of CGST Act which says if Principal don’t want to pay tax at the time of sending goods to job worker then principal supplier has to intimate the details of goods sending for job work on the portal by 25th day of the month succeeding the relevant quarter (in Form GST ITC-04) and generate delivery challan as specified in Rule 55.
If inputs are not received within 1 year (extension for another 1 year) and capital goods within 3 years (extension for another 2years) from the date of transfer of goods by principal to job worker or from the date of receipt by job worker (if some other supplier directly send the goods; bill to ship to model) then such transfer shall be considered as supply by principal and liability to pay GST arise on the original date when such goods were transferred by principal.
Bill to ship to model: Let us understand with the help of example what is bill to ship model: If Mr A has sold Shirts to Mr B (principal) but is asked to send the shirts directly to the job worker premises, although goods physically sent to job worker premises but place of supply of principal supplier shall be considered; this model is Bill to Ship to model. On this supply, principal supplier claim ITC when job worker received goods on behalf of principal supplier. Even if these goods directly sent to job worker premises still principal supplier would follow the provision of sec143 as it is the deeming provision that goods is ultimately received by principal supplier hence principal supplier give intimation in respect of such goods.
In context of place of supply (POS) for Job Work Service
Place of Supply in case of Job work is as per section 12 of IGST Act. As no specific provision provided in the section hence residuary provision shall apply where location of recipient is the place of supply.
For Job Worker:
Since Principal supplier is always registered, supply is always business to business hence POS is always Location of recipient i.e. Principal Supplier
| Place of Job worker | Place of Principal supplier | POS | As per section 12(2) of IGST Act |
| Maharashtra | Delhi | Delhi | Inter-state i.e. Location of Recipient |
| Maharashtra | Maharashtra | Maharashtra | Intra-State i.e. Location of Recipient |
For Principal Supplier:
Supply is always business to business hence POS as per section 12(2) of IGST Act is Location of recipient i.e. Job worker
(Exception: in case goods notified by commissioner such declaration not required)
Situation if goods bought back to registered premises of supplier and if goods directly supply from job worker’s premise: In case goods are supplied from registered premises after they are bought back then normal provisions of Place of Supply are applicable but if they supply directly through job worker premises then problem arises is that job worker might be an unregistered or registered. If he Job Worker is registered then there is no bar on supply of goods through his registered premises, but if job worker is unregistered then principal has to declare Job worker’s premise as his additional place of business. But here is an issue arise; if job worker is unregistered and is in same state in which principle has registered premise then there is no issue for principle supplier to declare such place as his additional place but what if such job worker is belong to another state? In such cases, supplier cannot declare such Place of Business as Additional Place of Business as GST is a state wise registration process.
How to come up with such issue: Principal should ask job workers to take voluntarily registration of his premises and get themselves registered.
Availing ITC: Who is eligible for claiming ITC on inputs and capital goods?
As per section 19, ITC shall be available to principal irrespective of fact that whether 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. It is also clarified that 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.
Application of E-way bill on Job Work – As E-way bill is generated on inter goods transactions for the value exceeding Rs.50,000 as per section 138 of CGST Act 2017 but if the goods are sent for job work then e-way bill is mandatory irrespective of the value of supply. But if the goods are transferred within a state then provision of e-way bill attract only if the value of supply exceed the limit of said state.[Let’s suppose Mr A of Delhi sent goods of Rs.50, 000 to Maharashtra since such transaction is inter-state hence Mr A mandatorily issue E-way bill irrespective of value of goods but in case Mr A sent goods to Job Worker premise (assume registered) in Delhi (Generation of E-way bill in case of Delhi only when value exceed Rs1 Lakh) then Mr A generate bill if value of transaction exceeds Rs.1 Lakh]
Misc. Provision: Supply of waste and scrap generated during the job work
As per Section 143(5) of the CGST Act provides that the waste and scrap generated during the job work may be supplied by the registered job worker directly from his place of business or by the principal in case the job worker is not registered. The principles for inputs and capital goods apply mutatis mutandis in this case.
Documentation
In case goods sent for job work deliver challan as per Rule 55 of CGST Rule issued which contains the following details:
- Date & number of delivery challan
- Name, address & GSTIN of consignor and consignee
- HSN Code and description of goods
- Quantity
- Taxable Value, tax rate and tax amount
- Place of supply and signature
Principal prepare in triplicate, challan as per Rule 45 and 55 for sending goods to job worker. The job worker send one copy of said challan along with goods to principal supplier while returning goods
Some Related Judgements
- Consumables can be sent for job work, and these need not be returned– In Ratan Projects & Engineering Co. (P.) Ltd., In re [2019] (AAR-West Bengal), applicant, a manufacturer of cable tray, angel ladder tray, etc., was sending steel structures for galvanizing to a job worker along with furnace oil, zinc, nickel that are to be consumed in the galvanizing process. It was held that goods like furnace oil, zinc, etc., consumed in the process of galvanizing are inseparable from galvanized goods. They should not be treated as supply in terms of section 143(3) of the CGST Act, provided they have been entirely used up in the process of galvanizing, even if they are not returned within the time allowed under section 143(1)(a) of CGST Act. The return of galvanized goods to the applicant satisfies the condition of receiving back inputs in accordance with section 143(1) (a) of the GST Act.
- Job work under GST law may include even manufacture, process of conversion of Coal into electricity– A process cannot be considered as job-work if principal sends minor inputs to the job-worker and all other inputs/goods utilized in the final product are being procured/purchased by the job-worker. This will defeat the very purpose and idea of job-work.
But such case is not here. The generation of electricity from coal supplied by the principal is the manufacture of electricity and not considered as job work – JSW Energy Ltd. In re (2018) 68 (AAR – Maharashtra)
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