Section 2 (62) of the model GST Law 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.
This definition is much wider than the one given in Notification No. 214/86 – CE dated 23.03.1986 as amended, wherein job-work has been defined in such a manner so as to ensure that the activity of job-work must amount to manufacture. Thus the definition of job-work itself reflects the change in basic scheme of taxation relating to job-work in the proposed GST regime.
Goods sent by a taxable person to a job-worker will not be treated as supply and not liable to GST. In terms of proviso to Para 5 of Schedule I of the model GST law the supply of goods by a registered taxable person (principal) to job-worker, in terms of Section 43A, 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.
Section 43A of the model GST law 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. 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.
As a job-worker would be a supplier of services he would be required to obtain registration if his aggregate turnover exceeds the prescribed threshold.
The goods principal directly supplied from the job-worker’s premises will not be included in the aggregate turnover of the job-worker. It will be included in the aggregate turnover of the Principal.
The principal can supply the goods directly from the premises of the job-worker without bringing it back to his own premises. But with a rider that the principal should have declared the premises of such job-worker as his additional place of business or where the job-worker is a registered person or where the goods have been notified.
The goods can be supplied directly from the place o business of job-worker without declaring it as additional place of business in two circumstances namely where the job-worker is a registered taxable person or where the principal is engaged in supply of such goods as may be notified in this behalf.
In the model GST law, aspects relating to taking input tax credit in respect of inputs / capital goods sent for job-work have been specifically dealt in Section 16A, 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 180days from the date of being sent out. In case the inputs are sent directly to the job-worker, the date shall be counted from the date of receipt of inputs by job-worker. Further an amount equivalent to the input tax credit availed on such inputs has to be paid along with interest, in case the inputs are not received back within the specified time. The credit can be reclaimed when the inputs are actually received back.
The provisions of job-work will not be applicable to all categories of goods. 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.