Job Work procedure under CGST Act 2017 with reference to E Way bill Rules 2018.

Meaning of Job Work –

When the owner of the goods (Principle) sends his goods to a different person  for carrying out certain process, which may or may not result in the change of the specifications of the product, that activity is termed as Job Work Activity. In this activity or procedure, job worker processes the material received from the Principle and sends back the material within the stipulated time.

When in Previous tax regime, there was also the procedure of job work, wherein material used to be sent on 57F4 Challan, prepared in Part A & Part B. These had to be closed within the stipulated time, failing which, there were legal consequences.

Under GST regime also, the said procedure of Job work has been continued, but with minor alterations in it. Job work procedure under CGST Act 2017 is governed by Section 143 & under CGST Rules 2017, it is governed by Rule 45.

Sec 143 of the CGST Act 2017 is produced below:

A registered person (herein after referred to as the “Principle”)may under intimation and subject to such conditions as may be prescribed, send material or capital goods, without payment of tax, to a job worker for job work and from there subsequently to another job worker and likewise, & shall –

A) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds, tools, dies, jigs & fixtures, or both, within one year and three years respectively, of their being sent out to any of his place of business, without payment of tax.

B) supply such inputs, after completion of job work or otherwise, or capital goods, other than moulds, dies, jigs & fixtures or both, within one year & three years, respectively, of their being sent out from the place of business of job worker on payment of tax within India, or with or without payment of tax for export, as the case may be.

The definition of ‘Job-work’ under GST is covered under section 2(68) of the CGST Act 2017 states “Any treatment or process undertaken by a person on goods belonging to another registered person”. Therefore, job-worker is the person (registered or unregistered) who is processing or treating the goods of another registered person and the owner of the goods is called the Principal in this respect.

Section 19 of the CGST Act 2017 explains the definition of the Principal as ‘a person supplying goods to the job-worker.’

Procedure of job work as per CGST Act 2017 –

A] As per Rule 45 of the CGST Rules 2017, the Principle can send the goods or capital goods to a job worker under a cover of challan and the job worker can further send the goods or capital goods to another job worker either on his challan or the challan issued by the principle.

B] The challan issued by the principle while sending the goods to job worker, should contain the details as specified under Rule 55 of the CGST Rules 2017.

C] Contents of the challan as per Rule 55 of the CGST Rules 2017-

a) Number and date of challan

b) Name, Address, and GSTIN of Job worker

c) Name, Address and GSTIN of RTF

d) HSN Code and Description of Machinery – For Hydraulic Thread rolling machine (by NKTC) HSN code 846320 and for thread rolling machine model MTR -30 (by MTE) HSN code 8459

e) Quantity or Set of Machinery in numbers 1 no each, (if any extra  dies, spares and tools over and fitted to machinery are given along with machinery it should be recorded separately and signature for receipt of the same should be obtained from Job worker.

f) Taxable value, Tax rate and Tax Amount : Tax rate CGST 9% and SGST 9% for both the machines if within Maharashtra, 18% IGST in case out of Maharashtra : WDV for hydraulic Thread rolling machine Rs.3,90,922/- and WDV for Thread rolling machine is Rs. 9,28,290/-

g) Place of Supply in this case – Sinnar

h) Signature of authorized signatory registered with GSTN portal.

D] The details of the challans in respect of the goods sent to a job worker or received from a job worker during a particular Quarter of the Financial Year shall be included in the FORM GST ITC 04 furnished for that period on or before the 25th day of the month succeeding the said Quarter.

E] In case the inputs or capital goods are not returned by the job worker to the principle within the time stipulated in Section 143, it shall be deemed that such inputs or capital goods had been supplied by the principle to the job worker on the day when the said inputs or capital goods were sent out. Such supply will also be declared in the GSTR 1 of the principle and he shall be liable to pay the tax along with Interest.

While we are discussing about the job work procedure under the CGST Act 2017, we should also be aware about the meaning of the term “Capital Goods” to be considered for this Act.

The term “Capital Goods” shall include “Plant & machinery as defined in the Explanation to Section 17 shall mean apparatus, equipment & machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural support but excludes –

I] land, building or any other civil structures

II] telecommunication towers &

III] pipelines laid outside factory premises

Supply of goods from Job workers premises –

Principle cannot supply the inputs or capital goods directly from the place of business of a job worker unless the Principle declares the place of business of a job worker as his additional place of business, except in case –

1. If the job worker is registered under Section 25 of CGST Act 2017 or

2. Where the principle is engaged in supply of such goods as may be notified by the Commissioner.

3. The responsibility of keeping proper accounts of all inputs or Capital goods sent to job worker, shall lie with the Principal.

4. Any scrap arising from the process of job work, may be supplied directly by the job worker directly from his place of business o payment of tax, if such job worker is registered or by the principle, if such job worker is not registered.

Input Tax credit on goods supplied to job worker

Section 19 of the CGST Act, 2017 provides that the principal (a person supplying taxable goods to the job-worker) shall be entitled to take the credit of input tax paid on inputs sent to the job-worker for the job-work. Further, the proviso also provides that the principal can take the credit even when the goods have been directly supplied to the job-worker without being brought into the premise of the principal. The principal need not wait till the inputs are first brought to his place of business.

E Waybill Rules for Inputs or Capital Goods to be sent for Job work –

As like every other supply, either of goods or services, is included in the E Waybill Rules 2018, so is the job work procedure being included in E Waybill Rules. E Waybill Rules are governed under CGST Rules 2018 vide Rule 138. This Rule was amended by the government on 01st April 2018. Rule 138 of CGST Rules 2017 says –

Every registered person who causes movement of goods of consignment value exceeding Fifty Thousand Rupees –

A] in relation to a supply; or

B] for reasons other than supply; or

C] due to inward supply from an unregistered person,

Shall, before commencement of such movement, furnish information relating to the said goods as specified in FORM A of GSTEWB-01, electronically, on the common portal along with such other information as maybe prescribed….”

Thus, it is clear from the above Sub Rule (1B) of Rule 138 that the inputs or capital goods sent for job work should be accompanied by their respective E Waybills.

Also, the 3rd Proviso to Rule 138 states very clearly that where goods are sent by principle located in one state or union territory to a job worker located in another state or union territory, the e way bill shall be generated either by principle or by job worker, if registered, irrespective of the value of the consignment.

It is very clear that the condition of the value of consignment is not applicable to the inputs or capital goods sent for job work, while preparing the E Waybill. Even if the 3rd Proviso only talks about the inputs or capital goods being sent for job work, by principle located in one state to a job worker located in another state, the E Way Bill Rules are applicable to all the inputs or capital goods being sent for job work, even if principle and job worker are located in same state or union territory.

Some examples of Inputs or capital goods being sent for job work with reference to E Waybill Rules-

Flow Chart 1 – Inputs or Capital Goods Sent by Principal to Job Worker –

Material to be sent by Principle for Job work

Principal prepares Challan in Triplicate

(Original for Job Worker, Duplicate for Transporter, Triplicate for Principal)

Principal ensures all the contents of Challan As per Rule 55

(CGST Rules 2017)

Principal prepares E Waybill irrespective of consignment value.

Inputs or Capital Goods Sent to Job worker with all documents

Whether Inputs or Capital Goods received back by principal within stipulated time

Flow Chart 2 – Inputs or Capital Goods Sent directly by Principal without receiving –

Material sent directly by Principle without receiving in his premises

Principal prepares Challan in Triplicate

(Original for Job Worker, Duplicate for Transporter, Triplicate for Principal)

Principal ensures all the contents of Challan As per Rule 55

(CGST Rules 2017)

Principal prepares E Waybill irrespective of consignment value.

(Transaction type will be “Bill From [Principals GSTIN] – Dispatch From [Address of supplier])

Inputs or Capital Goods received by Job worker with challan + E Waybill & Principal receives the invoice of Inputs or Capital Goods with E Waybill

Supplier of Inputs or capital Goods prepares E Waybill of his invoice in the name of Principal (Transaction Type will be Bill To [Principals GSTIN] – Ship To [Job workers Address]).

Whether Inputs or Capital Goods received back by principal within stipulated tim 2

Flow Chart 3 – Inputs or Capital Goods sent by Job worker to another job worker –

Material to be sent by Principle for Job work

Principal prepares Challan in Triplicate

(Original for Job Worker, Duplicate for Transporter, Triplicate for Principal)

Principal ensures all the contents of Challan As per Rule 55

(CGST Rules 2017)

Principal prepares E Waybill irrespective of consignment value.

Inputs or Capital Goods Sent to Job worker with all documents

Job Worker sends the Inputs or Capital Goods to another Job worker

(Challan may be prepared by Job worker or Principal)

Job worker receives the inputs or Capital Goods within Stipulated time

Whether Inputs or Capital Goods received back by principal within stipulated time?

Whether Inputs or Capital Goods received back by principal within stipulated time 3

Flow Chart 4 – Inputs or Capital Goods sent directly to end user from job workers premises (in same state or union territory)-

Material to be sent by Principle for Job work

Principal prepares Challan in Triplicate

(Original for Job Worker, Duplicate for Transporter, Triplicate for Principal)

Principal ensures all the contents of Challan As per Rule 55

(CGST Rules 2017)

Principal prepares E Waybill irrespective of consignment value.

Inputs or Capital Goods Sent to Job worker with all documents

Job Worker sends the Inputs or Capital Goods to another Job worker

(Challan may be prepared by Job worker or Principal)

Job worker receives the inputs or Capital Goods within Stipulated time

After completion of job work process, principal supplies the material directly to end customer.

Principal Issues the invoice in the name of End Customer and sends the same to Job worker for dispatch of material along with E Waybill.

Principal prepares E Waybill as per the tax invoice.

(Transaction type will be Bill from [Principals GSTIN] – Dispatch From [Job Workers premises])

Job worker dispatches material with Principals invoice & E Waybill to customer address

(Inputs or Capital Goods to be dispatched within stipulated time)

Flow Chart 5 – Inputs or Capital Goods sent directly to end user from job workers premises (in different states or union territory)-

Material to be sent by Principle for Job work

Principal prepares Challan in Triplicate

(Original for Job Worker, Duplicate for Transporter, Triplicate for Principal)

Principal ensures all the contents of Challan As per Rule 55

(CGST Rules 2017)

Principal prepares E Waybill irrespective of consignment value.

Inputs or Capital Goods Sent to Job worker (in different state) with all documents

Job Worker sends the Inputs or Capital Goods to another Job worker

(Challan may be prepared by Job worker or Principal)

Job worker receives the inputs or Capital Goods within Stipulated time

Principal supplies the material directly to end customer from job workers premises.

(Customer is in the same state where Job worker is located)

Principal Issues the invoice in the name of End Customer and sends the same to Job worker for dispatch of material along with E Waybill.

Principal prepares E Waybill as per the tax invoice.

(Transaction type will be Bill from [Principals GSTIN] – Dispatch From [Job Workers premises])

Job worker dispatches material with Principals invoice & E Waybill to customer address

(Inputs or Capital Goods to be dispatched within stipulated time)

Conclusion –

Thus, one may think the job work procedure to be an easy one, but it has legal implications, which, if not followed properly or with the wrong data, may lead to serious consequences. Job work procedure under GST is also as important as the other procedures under GST. Even while doing the job work transactions, one thing which everyone should keep in mind is that such transactions also affect the Input Tax Credit of the principal if the goods are not received within the stipulated time. According to Section 19(2) of CGST Act, the principal can avail the ITC where goods are sent to job worker premises directly from the vendor location without coming to the principal’s premises. Principal can avail ITC on such goods sent to job worker, provided the vendor mentions -customer as the principal and consignee as the job worker on the face of the invoice. In case of goods imported and directly sent to the job worker from the custom station, the principal requires to raise a delivery challan under Rule 55.Since the ownership of the goods and the responsibility of maintaining the data of Job work lies with the Principal, if such inputs or capital goods are not received within the time frame of 1 Year or 3 Years respectively, the principal has to generate the tax invoice, pay the tax with interest & show the details of invoice in his GSTR 1.

It is to update that the GST Council has not given any specific “Format” for challan. What the GST Council has given is the contents of the challan which should be incorporated by the principal in his challan format.

References –

1. www.cbic.gov.in

2. www.ewaybillgst.gov.in

3. CGST Act 2017

4. CGST Rules 2017

Author Bio

Qualification: MBA
Company: Right Tight Fastners Pvt Ltd
Location: Nashik, Maharashtra, IN
Member Since: 23 Sep 2020 | Total Posts: 1

More Under Goods and Services Tax

7 Comments

  1. Kuber says:

    Sir,
    Our company sends Goods for Job work and we make EWB for that Job work as well, but we never file ITC-04.

    What are the consequences ? Have you came through any notice from GSTN in regard to that ?

    1. vallabhd says:

      Dear Mr. Kuber
      It is surprising to note that your firm never filed ITC 04.

      Please be updated that as per the CGST Act 2017, it is mandatory to upload the data of Job work challans of every Quarter for Financial year by 25th of the next month. Even if the government is not taking follow ups for the said return, it should not be mistakenly understood by you that it is not compulsory.
      Also, GST ITC 04 will be closely checked during your GST Audits & at that time the GST officials may charge you with Interst and / or penalty as the per the Rules in force.
      My sincere advice to you, kindly upload all your job work data on GST portal through GST ITC 04 which is pending till date.

      In case of any doubt, feel free to revert.

      Thanks
      Vallabh

  2. B C BHAT says:

    Sir,
    Article is very excellent and informative.
    I seek your clarification, sending the raw material for job work is not a sale. Hence, I feel, % and amount of GST need not have to mention in Delivery challan while sending the goods for job work purpose. Your clarification is requested pl

    1. vallabhd says:

      Hello Mr. Bhat
      Thank you for your kind appreciation about my article.

      Yes it is true that sending raw material for job work is not a sale, but still the Taxable value, GST Rate, GST Amount and Total Invoice value have to be mentioned on the challan.
      I would request you to refer Rule 55 of CGST Rules 2017 in this regard, which give clarification about the contents of challan while sending the inputs or capital goods to job worker.
      This is required in case if job worker does not send you the inputs or capital goods within stipulated time (01 year & 03 years respectively) then Principal has to generate tax invoice to job worker, from the date when such inputs were sent out, along with Interest.
      I hope this satisfies your doubts. Feel free to revert..
      Thank you

  3. Abhijeet Harne says:

    Hi
    Vallabh
    Informative Article
    What if we would send our finished material from factory to end customer.
    We should make way bill for the same or not.

    Thanks
    Abhijeet Harne

    1. vallabhd says:

      Hi Abhijeet
      Thank you for your appreciation.
      Sending material from your factory premises to end customer is nothing but regular supply. For regular supply, E Way Bills are to be prepared as per the value of consignment.
      If you are sending semi-finished goods or Raw Material to job worker, then the E Way Bill is mandatory irrespective of the value of consignment.
      I Hope this will solve your doubts.

      Thanks
      Vallabh Dani

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