Most simplified Job work Process under GST
This article will act as a complete guide which will cover all aspects/ applicable GST provisions from inception of job work process till the completion of job work process along with the possible scenarios. The GST Act has special provisions with regard to removal of goods for the job work and receiving back the goods after processing from the job worker without payment of GST. In this article, author has explained benefits available both to the principal and the job worker.
Introduction
Job work means processing or working on raw materials or semi-finished goods supplied by the principal manufacturer to the job worker. This is to complete a part or whole of the process of the finishing of an article or any other essential operation.
Page Contents
- Meaning of Job work under CGST Act, 2017
- General GST provisions applicable on the Principal
- General GST provisions applicable on the Job worker
- GST Compliances when goods are moved to place of Job worker
- GST Compliances when goods are moving back from place of Job worker
- Scenario 1 – Principal bring back goods after Job work with in the time Limit
- Scenario 2 – Principal is not able to bring back goods with in the time Limit
- Scenario 3 – Principal bring back goods after time limit from the Job worker
- Scenario 4 Compliances in case finished goods are moved from the place of Job worker
- Other Critical Points
- Annexure A GST rates for the Job work
- Annexure B Points to be Noted for the ITC-04 return
- Annexure C_ Points to be Noted for the Delivery Challan
- Annexure D – Points to be Noted for the E-way Bill
Meaning of Job work under CGST Act, 2017
Job work is defined as “any treatment or process conducted by a person on goods belonging to another registered person” under Section 2(68) of the CGST Act, 2017.
The person who does the task is referred to as a ‘job worker.’ The commodities do not pass to the job worker; instead, the principal retains possession.
Person sending goods for job work is termed as “Principal”. He should be a registered person.
General GST provisions applicable on the Principal
| Sr. No. | Particulars | Compliances |
| 1 | Registration | ♦ No separate registration is required by the principal if principal has to send goods to the job worker.
♦ Principal is required to add place of job worker in the GST Registration certificate in case Job worker is not registered under GST. |
| 2. | Responsibility | The principal is responsible to maintain proper accounts for inputs and capital goods sent to Job Worker, as well as the items returned from Job Worker or supplied from the job site. |
| 3. | Statutory Return | Principal must provide details of challans relating to goods sent to a worker, received from a worker, or sent from one worker to another on half yearly basis in FORM GST ITC-04 by 25th of the following month. The contents of the return are provided in Annexure B. |
General GST provisions applicable on the Job worker
| Sr. No. | Particulars | Compliances |
| 1 | Registration | ♦ A job worker is required to obtain registration only in cases where his aggregate turnover, to be computed on all India basis, in a financial year exceeds the threshold limit |
| 2. | Valuation | ♦ As per Schedule II of CGST Act 2017, any treatment or process which is applied to another person’s goods is a supply of service
♦ Job worker has to issue an invoice for the value of his services i.e. for job work charges. ♦ As per section 15(2)(b) of CGST Act, any amount that the supplier is liable to pay in relation to the supply but which has been incurred by the recipient will form part of the valuation for that supply, if it has not been included in the price of such supply. |
| 3. | GST Rate | GST rate varies from 1.5% to 18% depends upon the nature of job work. GST rates of various job work are provided in Annexure A. |
GST Compliances when goods are moved to place of Job worker
Scenerio1 – Goods are moved from place of principal
| Sr. No. | Particulars | Compliances |
| 1 | Documents | ♦ The Inputs or Capital goods shall be sent to the Job worker based on the delivery challan and E way bill.
♦ The contents of the delivery challan are provided in Annexure C. ♦ The contents of the delivery challan are provided in Annexure D. |
| 2. | Tax Payment | Tax is not required to be paid by the principal. |
| 3. | Input Tax Credit | The principal is entitled to take credit of input tax on inputs and capital goods sent to a job worker for job work. |
Scenario 2 – Goods are moved directly from the place of supplier
| Sr. No. | Particulars | Compliances |
| 1 | Documents | ♦ The invoice of supplier should be in the name of buyer (Principal) and name, address should be mentioned in as consignee on invoice.
♦ The principal should issue Delivery challan under Rule 45 of CGST Rules and send it directly to Job worker |
| 2. | Tax Payment | Tax is not required to be paid by the principal. |
| 3. | Input Tax Credit | The principal is eligible for availing the Input tax credit on the goods sent for the job work even if goods are directly supplied to place of Job worker |
| 4. | Others |
Even imported goods can be sent from custom station of Imports to the place of Job worker. |
GST Compliances when goods are moving back from place of Job worker
Scenario 1 – Principal bring back goods after Job work with in the time Limit
| Sr. No. | Particulars | Compliances |
| 1. | Documents | ♦ Goods can be returned by the Job worker based on the delivery challan and E-way bill
♦ Job worker will raise tax invoice of the job work charges. |
| 2. | Input Tax Credit | Principal is eligible to take input tax credit of the GST charged by the Job worker on the tax invoice related to Job work charges |
| 3. | Others | No adverse implication, it will be treated as usual Job-Work. |
Scenario 2 – Principal is not able to bring back goods with in the time Limit
| Sr. No. | Particulars | Compliances |
| 1. | Documents | ♦ Goods can be returned based on the delivery challan and E-way bill.
♦ Principal has to raise tax invoice to the Job worker. ♦ Job worker shall be treated as our customer. Job worker is required to make payment to the Principal. Its better to have such specific provisions in the agreement clearly. |
| 2. | Tax impact | The goods sent on Job-work will be treated as Deemed Supply; time of supply will be on the date of receipt of goods by job-worker; GST shall be payable as if Inputs / Capital goods were supplied by the Principal to the Job worker on the day when the inputs/ Capital goods were sent out. This invoice is required to be reported in GSTR-1 and GSTR-3B |
| 3. | Input Tax Credit | Job worker is eligible to take ITC charged on the invoice |
| 4. | Interest | Tax is payable by the Principal along with interest @18% from the date on which goods were sent for the job work. This interest will be a cost the Company. |
| 5. | Example with amount |
♦ The Principal has sent inputs to the job worker on 14-04-2022 of INR 1 Cr. ♦ If the inputs are not received back by 13-04-2023 then it shall be deemed that such inputs had been supplied by the principal to the Job Worker on 14-04-2022 when the inputs were sent out. ♦ Principal has to issue tax invoice of the goods and such supply shall be taken by the principal in the GST Return of April 2023. ♦ The Principal shall make payment of output tax of INR 12 Lakhs (if GST rate is 12%) with interest of INR 2.16 Lakhs from the due date of payment of tax for return to be filed for the month of April 2022 till date of payment of output tax. ♦ Interest is calculated for the period of 20 May 2022 to 20 May 2023 |
Scenario 3 – Principal bring back goods after time limit from the Job worker
| Sr. No. | Particulars | Compliances |
| 1. | Documents | ♦ The goods sent on Job-work will be treated as Deemed Supply; time of supply will be on the date of receipt of goods by job-worker;
♦ Job worker will issue tax invoice to the principal for the movement of goods. ♦ Job worker shall not include value of the goods on the tax invoice supplied by the principal. |
| 2. | Tax Payment | Job worker shall charge GST on the tax invoice issued by him and report in the GST return. |
| 3. | Input Tax Credit | Principal is eligible to take ITC charged on the invoice |
| 4. | Others | Job worker shall be treated as our supplier |
Scenario 4 Compliances in case finished goods are moved from the place of Job worker
| Sr. No. | Particulars | Compliances |
| 1. | Documents | ♦ Invoice and E-way bill is required to be issued by the Principal to the customer and not by the Job worker
♦ Job worker shall issue tax invoice for the job work charges. |
| 2. | Tax Payment | ♦ If such supply is in India, GST is payable.
♦ If case of export, tax is not required to be paid if (‘Letter of undertaking”) LUT is filed by the Principal. |
| 3. | Conditions | ♦ Job worker should be registered under GST
♦ Otherwise, Principal has to declare place of business of job worker as his additional place of business. |
| 4. | Others | It is permissible under GST Act to send finished goods directly from the place of job worker, instead of bringing them back to the place of business of Principal. |
| 5. | Illustration |
♦ The principal is located in State A, the Job worker in State B and the recipient in State C, In this case, it will be treated as inter state supply. ♦ If customer is also located in State A, It will be treated as intra state supply |
Other Critical Points
| Sr. No. | Particulars | Compliances |
| 1. | Key Elements of Job work | ♦ The ownership of the goods does not transfer to the job worker but it rests with the Principal
♦ The Job worker is required to carry out the process specified by the Principal on the goods ♦ The Principal necessarily be a registered taxable person. If the principal is unregistered one, then the job work relation could not be established under GST law ♦ Goods sent for the job work should be taxable goods as duty liability will arise only when goods under consideration are taxable. |
| 2. |
Time limit for Inputs, Capital Goods and moulds, dies, Jigs, Fixtures and Tools
|
Inputs – With in 1 year from the goods being sent out from any of his place of business without payment of tax
Capital Goods – With in 3 years from the goods being sent out from any of his place of business without payment of tax. Moulds, dies, Jigs Fixtures and Tools – There is no time limit to bring back such consumables |
| 3. | Conditions to claim ITC by the Principal | ♦ Goods should be sent to job-worker by principal or directly from supplier.
♦ Goods shall be received back from job-work or sent or other job-worker or directly supplied to customer within the specified time limit. ♦ ITC-04 is to be filed by the Principal half-yearly or annually, as applicable. |
| 4. | Waste and scrap | ♦ If the job worker is registered, then it can be supplied by the job worker directly from his place of business, on payment of appropriate GST rate on the said waste/ scrap.
♦ If he is not registered, then the waste/scrap generated should be returned to the principal along with the goods and such waste/ scrap would be supplied by the principal on payment of tax. ♦ Alternatively, the principal may supply waste/ scrap directly from the premises of the job worker under the tax invoice on payment of tax. ♦ The principal should also maintain proper records of clearance of waste / scrap from the premises of the job worker. |
| 5. | Destroy/ Loss of goods during movement/ in premises of Job worker | Principal is required to reverse the input tax credit of inputs or Capital goods. |
Annexure A GST rates for the Job work
| Sr. No. | GST rate | Nature of Job work |
| 1. | 1.5% | ♦ Job work on diamonds falling under Chapter 71
♦ Supply of maintenance, repair or overhaul service in respect of aircrafts supplied to a person for use in course or furtherance of business |
| 2. | 5% | ♦ Job work or processing of goods where GST rate is Nil or 5%
♦ Manufacturing services of tailoring |
| 3. | 12% | ♦ Job work or processing of manufacture of umbrella
♦ Printing of paper products ♦ General job work – when inputs sent by registered person |
| 4. | 18% | ♦ Job work in relation to bus body building
♦ Manufacturing services on physical inputs (goods) owned by others, where inputs sent by unregistered person ♦ Other manufacturing services, publishing, printing and reproduction services, material recovery services ♦ Repairs, maintenance and installation (except construction) |
Annexure B Points to be Noted for the ITC-04 return
| Sr. No. | Particulars | Details |
| 1 | Contents | ♦ GST number of the Job worker
♦ Original Challan number ♦ Original Challan date ♦ Invoice details in case goods supplied from the premises of Job worker ♦ Description of goods ♦ HSN code of goods ♦ Taxable value of goods ♦ Tax rate and Tax amount ♦ Place of supply in case of inter state supply ♦ Signature |
| 2 | Frequency | ♦ Those with an annual aggregate turnover of more than Rs.5 crore – Half-yearly from April-September- due on 25th October and October-March due on 25th April.
♦ Those with an annual aggregate turnover of up to Rs.5 crore – Yearly from FY 2021-22 due on 25th April. |
Annexure C_ Points to be Noted for the Delivery Challan
| Sr. No. | Particulars | Details |
| 1 | Contents | ♦ Date and number of the delivery challan.
♦ Name, address and GSTIN of the consigner, if registered. ♦ Name, address and GSTIN or Unique Identity Number of the consignee, if registered. If unregistered, name, address and place of supply. ♦ HSN code for the goods. ♦ Description of goods. ♦ Quantity of goods supplied (provisional, where the exact quantity being supplied is not known). ♦ Taxable value of supply. ♦ GST tax rate and tax amount broken down as CGST, SGST, IGST and GST Cess – where the transportation is for supply to the consignee. ♦ Place of supply, in case of inter-state movement of goods. Signature. |
| 2 | Number of Copies |
Delivery challans must be prepared in triplicate as below: ♦ The original copy must be marked as ORIGINAL FOR CONSIGNEE. ♦ The duplicate copy must be marked as DUPLICATE FOR TRANSPORTER. ♦ The triplicate copy must be marked as TRIPLICATE FOR CONSIGNER. |
Annexure D – Points to be Noted for the E-way Bill
| Sr. No. | Particulars | Details |
| 1 | Contents | Contents of e way bill is broadly classified in two parts:-
Part A – Normally filled by consignor or consignee. ♦ GSTN of supplier ♦ Place of dispatch ♦ GSTIN of recipient ♦ Place of Delivery ♦ Document No. ♦ Document Date ♦ Value of Goods ♦ HSN Code ♦ Reason for Transportation Part B – Normally filled by the transporter. ♦ Vehicle number for road ♦ Transport document number |
| 2. | Others |
♦ E-Way Bill must be generated prior to goods being moved by the Job Worker to the principal or registered Job Worker. ♦ E way bill is required to be generated even if consignment value is less than INR 50,000. |
In conclusion, mastering the intricacies of the job work process under GST is crucial for fostering a transparent and efficient supply chain. Businesses that proactively embrace compliance and collaboration will not only navigate the regulatory landscape successfully but also unlock the full benefits available to both principals and job workers in the dynamic GST ecosystem.
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