Case Analyzed:-
1. What is job-work ?Provisions applicable to Job-worker?
2. Analyses the definition of supply in case goods send by the principal to Job-Worker.
3. Analyses situations where the Job –Worker required to take Registration or not.
4. Determination of Aggregate Turnover of the registered Job-Worker.
5. Goods supplied without payment of duty to Job-Worker.
6. Analyses situations where the Principal supply goods directly from Job-worker premises.
7. Analyses situations of ITC in respect of Inputs / Capital Goods sent to a Job-worker.
1. What is job-work? The Provisions applicable to Job-worker?
Section 2(62) of the MGL provides that “job-work “means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job-worker” shall be construed accordingly.
The provisions relating to job-work are applicable only when registered taxable person intends to send taxable goods. In other words, these provisions are not applicable to exempted or non-taxable goods or when the sender is a person other than registered taxable person.
2. Analyses the case that goods send by the principal to a Job-Worker is supply of good or not.
As taxable event in GST is SUPPLY, hence the first question is whether the goods sent by the principal to a job-worker is a supply of goods or not.
In this regard, Schedule I of the MGL states that the supply of goods and/or services by a taxable person to another taxable or non-taxable person in the course of furtherance of business without consideration shall be treated as Deemed supply.
Further Schedule II of the MGL states that treatment or process applied to another person’s goods (job work) is treated as supply of services.
But Para 5 of Schedule-I of the MGL – Supply of goods and / or services, without consideration, toa job worker is not to be treated as supply. Also section 43A of the MGL clearly spells out that the supply of goods by a registered taxable person (principal) to job worker shall not be regarded as supply of goods.
Therefore, it can be inferred that no GST shall be applicable on the goods supplied by the registered principal to a job worker.
3. Analyses situations where the Job –Worker required to take Registration or not.
There is no need for job worker will have to be compulsorily take registration.
But when a Job-worker be a supplier of services, he would be required to obtain registration if his aggregate turnover exceeds the prescribed threshold.
4. Determination of Aggregate Turnover of the registered Job-Worker.
The supply of goods, after completion of job-work, by a registered job-workershall be treated as the supply of goods by the “principal” and the value of such goodsshall not be included in the aggregate turnover of the registered job worker.
Example: -Let the value of raw materials supplied by principal be Rs. 5,00,000 and the job workers conversion cost be Rs. 1,00,000 and his profit margin be Rs. 50,000. If the principal sells the goods processed by the job worker at Rs. 8, 00,000. Then the price charged by the principal for sale of the processed goods of Rs. 8,00,000 would include aggregate turnover of Principal not in hand Job-worker.
5. Goods supplied without payment of duty to Job-Worker.
Section 43A of the MGL provides that the registered taxable person (principal) can send the taxable goods to a job-worker for job-work without payment of tax. He can further send the goods from one job-worker to another job-worker and so on subject to certain condition (the permission taken from the Commissioner by special order would suffice).
It may be noted that provisions of Section 43A are not applicable if non-taxable or exempted goods are proposed to be sent for job-work.
6. Analyses situations where the Principal supply goods directly from Job-worker premises.
Only in three circumstances where the goods can supply directly from the Job-work premises:-
a. Where the principal should declared the premises of such job-worker as his additional place of business or
b. Where the job-worker is a registered person or
c. Where the principal is engaged in supply of such goods as may be notified in this behalf.
8. Analyses situations of ITC in respect of Inputs / Capital Goods sent to a Job-worker.
Section -16 A of MGL specifically dealt with aspects relating to taking input tax credit in respect of inputs/capital goods sent for job-work, which provides that the credit of taxes paid on inputs or capital goods can be taken in the following manner.
Principal shall be entitled to take credit of inputs sent to a job-worker if the said inputs, after completion of job-work are received back in 180 days (in case of capital goods time limit is 2 Yr.) from the date of being sent out.
In case the inputs/capital goods are sent directly to the job-worker, the date shall be counted from the date of receipt of inputs/capital goods by job-worker. Further an amount equivalent to the input tax credit availed on such inputs/capital goods has to be paid along with interest, in case the inputs/capital goods are not received back within the specified time. The credit can be reclaimed when the inputs/capital goods are actually received back.
Courtesy :
i. Background materials on GST by IDT Committee, ICAI.
ii. Material on GST by National Academy of Customs Excise & Narcotics.
iii. FAQ on GST by CBEC.
