CA Dilip Jain
Introduction: Job work is an integral aspect of the manufacturing industry. Manufacturers usually outsource a portion of their activities to a third person. This turns out be cost-efficient and helps them to be more productive by focusing on their core activities. This process of outsourcing the whole or a part of an activity to a third person is called ‘Job work’. This activity can be at any stage in the manufacturing cycle and the goods sent for job work can be raw materials or semi-finished goods or capital goods. The manufacturer sending the goods for job work is generally referred to as the ‘Principal’ and the person performing the activity of job work is called the ‘job worker’
Current Regime:
> Definition: Job work means the processing or working upon of raw material or semi-finished goods supplied to a job worker, to complete a part or whole of a process, resulting in the manufacture or finishing of an article or any operation which is essential for the process. This implies that activity by the manufacturer should result in manufacture or completion of finished goods or should be an essential operation in the manufacturing process. Registration of Principal is Irrelevant.
>Input Tax Credit: The principal is eligible for input tax credit on the inputs or capital goods sent for job work if they are received back within 180 days or 1 year respectively, of their being sent for job work.
Taxes Applicability: If the activity amounts to manufacture, excise duty is liable to be paid by the job worker. However, on furnishing of a declaration by the principal, the job worker is exempted from excise duty.
> Processing charges charged by job worker – Service tax is not applicable on the processing charges charged by a job worker.
> Moulds and dies, jigs and fixtures or tools sent to a job worker – No tax is applicable on moulds and dies, jigs and fixtures or tools sent to a job worker.
> Waste or scrap generated during job work: Any waste or scrap generated during job work can be supplied with payment of tax by the job worker directly from his place of business if he/she is registered, or by the principal, if the job worker is unregistered.
GST REGIME:
> Definition: Job work means any treatment or process undertaken by a person on goods belonging to another registered person. Job work is defined in a broader perspective to include any treatment or process done by a job worker, irrespective of whether the activity results in manufacture or is an essential operation to complete the manufacturing process. The treatment or process undertaken by a job worker amounts to job work only when it is performed on goods belonging to a registered person. Hence, even if the goods are taxable but belong to an unregistered person, the activity is not considered as job work. This is a major change from the current regime, where the registration of the principal is irrelevant.
> Input Tax Credit: The Principal is eligible for ITC on inputs and capital goods sent for job work.
> Taxes Applicable: When inputs or capital goods are sent for job work : When inputs or capital goods are sent for job work, no tax is applicable. At the time of removing the goods for job work, the principal can issue a delivery challan.
> When inputs or capital goods sent for job work are brought back within 1 year or 3 years, respectively: When inputs or capital goods sent for job work are brought back to the principal’s place of business within 1 year or 3 years respectively, of their being sent for job work, no tax is applicable.
> When inputs or capital goods sent for job work are supplied from the job worker’s place within 1 year or 3 years respectively: When inputs or capital goods sent for job work are supplied from the job worker’s place of business within 1 year or 3 years respectively, tax is applicable if the supply is within India. If the supply is for export, no tax is applicable. For supplying inputs or capital goods from the job worker’s place of business, the principal has to declare the job worker’s place of business as his additional place of business, unless- (a) The Job Worker is registered OR (b) The Supply is of notified goods.
> When inputs or capital goods sent for job work are NOT brought back or supplied from the job worker’s place within 1 year or 3 years respectively: They will be considered to have been supplied by the principal to the job worker on the day they were sent out. Hence, the Principal will be liable to pay tax on the supply, along with the interest due.
> Processing charges charged by job worker: GST is applicable on processing charges charged by the job worker.
> Moulds and dies, jigs and fixtures or tools sent for job work: No tax is applicable on moulds and dies, jigs and fixtures or tools sent to a job worker for job work.
> Waste or scrap generated during job work: If any waste or scrap is generated during job work, it can be supplied by the job worker directly from his place of business by paying tax, if he/she is registered. If the job worker is not registered, the principal can supply the same by paying tax.
Conclusion: The tax treatment of job work under GST remains largely similar to the current regime. An important point to note is that the period within which inputs should be brought back or supplied from the job worker’s place is now 1 year instead of 180 days earlier. Similarly, the period within which capital goods should be brought back or supplied is now 3 years instead of 1 year earlier. Also, GST will now be levied on processing charges charged by the job worker. Also Job Work will be treated only when Principal is Registered.
As per the CBEC’S Pamphlet released ON JOB WORK, the principal has to inform jurisdictional officer before supplying goods. But neither Act no Rules lay down such directions.
We are manufacturers of nut & bolts on plating & phospheting we deduct income tax (TDS) & WCT TDS(IN Maharashtra) Now Whether WCT TDS APPLICABLE FROM 1/7/17