Introduction:

Job work means outsourcing of manufacturing activities for completion of a product beyond the premises of the principal manufacturer. The principal manufacturer gets the manufacturing facilities through job worker to meet requirement of customers. Job work is one of the most cost effective ways to get the finished goods without any investment on plant and machinery for manufacturing process. The importance of Job work has tremendously increased due to market competition on first moving consumer goods and outsourcing of goods available in cheaper prices. In Indian market context for domestic products requirement is mainly depends upon Job Work.

Meaning of Job work in Pre-GST era:-

In pre-GST era Job Work was carried as per Notification No. 214/86-CE and defined “Job Work” means processing or working upon of raw materials or semi-finished goods supplied to the job worker, so as to complete a part or of the process resulting in the manufacture or finishing of an article or any operation which is essential for the aforesaid process.

Meaning of Job work under GST law:-

Section 2 (68) of CGST Act, 2017, “Job work” means any treatment or process undertaken by a person on goods belonging to another registered person and expression “job worker” shall be constructed accordingly.

The registered person on whose goods (inputs or capital goods) job work is performed is called the “Principal” for the purpose of section 143 of the CGST Act. The principal must be a registered taxable person under Section 25 of the CGST Act, 2017. The person who under takes to carry job working of another person is called “job worker”.

The transaction between principal and job worker is fully covered under scope of supply and GST is payable thereon. But there is exception in terms of Section 143(1) of the CGST Act, 2017 prescribed that registered person can send any inputs or capital goods, without payment of tax, to a Job worker for job work and there subsequently send to another job worker and likewise.

Facility of Job Working:

Section 143(1) of CGST Act, 2017, the inputs and capital goods can be sent for job work and Section 19 (7) of CGST Act, 2017, Mould and dies, jigs and fixtures, or tools sent out to a job worker for job work.

Explanation: For purposes of job work, input includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or the job worker.

Job work procedure:

The procedure of Job work has been specified under Chapter XX1 as Miscellaneous provisions under CGST Act, 2017. Section 143(1) of CGST Act, provides that a registered person (principal) may under prescribed with due intimation to GST officer and subject to such conditions as may be prescribe ,send inputs or capital goods , without payment of tax, to a Job worker for Job work and if required, from there subsequently send to another Job worker and so on. Subsequently, on completion of the job work (by the last job worker), the principal shall bring back the goods to his place of business or supply( including export) the same directly from the place of business / premises of the job worker within one year in case of inputs or within three years in case of capital goods ( except moulds and dies, jigs and fixtures or tools).

Responsibility of the Principal manufacturer on job working:

Section 143(1) (a) and (b) of CGST Act, 2017 prescribed that principal manufacturer shall comply the following responsibilities:

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

Job worker place additional place of business:

In order to comply the provisions of Section 143(1) (b) of CGST Act, the principal manufacturer has to declare the job worker premise as additional place of business because after the completion of job work of goods, instead of brining back job work goods into his own premises, he can directly supply such goods to customers either payment of GST or without payment of GST for export of goods. The principal manufacturer does not require to declare addition place of business in a case –

(i) where the job worker is registered under section 25; or

(ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner.

Accounting of Job working of inputs and capital goods:

Section 143(2) of CGST Act, prescribed that the responsibility for keeping proper accounts for the inputs or capital goods sent for job work lies with the principal.

GST shall be payable by the principal manufacturer on “Deemed Supply” in the following non-compliances:

Section 143 (3) Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of one year of their being sent out, it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out.

Section 143 (4) Where the capital goods, other than moulds and dies, jigs and fixtures, or tools, sent for job work are not received back by the principal in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of three years of their being sent out, it shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital good sent out.

Special provisions Job work relating to moulds and dies, jigs and fixtures, or tools:

Section 19(7) of CGST Act, specified that time limit of returning goods after Job work within one / three years is not applicable in case moulds and dies, jigs and fixtures, or tools sent out a job worker for job work. The job worker can be retained at place of job work. The further disposal of these goods as scrap liable for payment of GST by Job worker if he is registered otherwise principal has to pay GST on sale of such scrap.

Documents for movement of inputs and Capital goods to Job worker:

Rule 55 (1) (c) of CGST Rules, 2017 provides that for the purpose of transportation of goods for job work, the principal manufacturer may issue a delivery challan, serially numbered not exceeding sixteen characters, in one or multiple series, in lieu of invoice at the time of removal of goods for transportation , containing the following details , namely :-

(i) date and number of the delivery challan;

(ii) name, address and Goods and Services Tax Identification Number of the consigner, if registered;

(iii) name, address and Goods and Services Tax Identification Number or Unique Identity Number of the consignee, if registered;

(iv) Harmonized System of Nomenclature code and description of goods;

(v) quantity (provisional, where the exact quantity being supplied is not known);

(vi) taxable value;

(vii) tax rate and tax amount – central tax, State tax, integrated tax, Union territory tax or cess, where the transportation is for supply to the consignee;

(viii) place of supply, in case of inter- State movement; and

(ix) signature.

Sub-rule (2) of Rules 55, the delivery Challan shall be prepared in triplicate, in case of supply of goods (a) Original for Consignee, (b) Duplicate for transporter and (c) Triplicate for consigner.

Taking input tax credit in respect of inputs and capital goods sent for job work:

In terms of Section 19 (1) and 19(4) of CGST Act, the principal shall, subject to such conditions and restrictions as may be prescribed, be allowed to take credit of input tax on inputs and capital goods sent to a job worker for job work.

Further, as per Section 19(2) and 19(5) of the CGST Act, the principal shall be entitled to take credit of input tax on inputs and capital goods, even both are directly sent to a job worker for job work without their being first brought to his place of business.

Section 19 (3) of CGST Act, where the inputs sent for job work are not received back by the principal after completion of job work or otherwise or are not supplied from the place of business of the job worker in accordance with clause (a) or clause (b) of sub-section (1) of section 143 within one year of being sent out, it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out:

Provided that where the inputs are sent directly to a job worker, the period of one year shall be counted from the date of receipt of inputs by the job worker.

Section 19 (6) of CGST Act, where the capital goods sent for job work are not received back by the principal within a period of three years of being sent out, it shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out:

Provided that where the capital goods are sent directly to a job worker, the period of three years shall be counted from the date of receipt of capital goods by the job worker

Conditions and restrictions in respect of inputs and capital goods sent to the job-worker:

Rule 45of CGST Rules, 2017 provides conditions and restrictions in respect of inputs and capital goods sent to the job worker and the sub-rules as under

(1) The inputs, semi – finished goods or capital goods shall be sent to the job worker under the cover of a challan issued by the principal, including where such goods are sent directly to a job-worker.

(2) The challan issued by the principal to the job worker shall contain the details specified in rule 55.

(3) The details of challans in respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another during a quarter shall be included in FORM GST ITC-04 furnished for that period on or before the twenty- fifth day of the month succeeding the said quarter.

(4) Where the inputs or capital goods are not returned to the principal within the time stipulated in section 143, it shall be deemed that such inputs or capital goods had been supplied by the principal to the job worker on the day when the said inputs or capital goods were sent out and the said supply shall be declared in FORM GSTR-1and the principal shall be liable to pay the tax along with applicable interest.

Disposal of scrap and waste after job working:

Section 143(5) of CGST Act, specified that , Notwithstanding anything contained in sub-sections (1) and (2), any waste and scrap generated during the job work may be supplied by the job worker directly from his place of business on payment of tax, if such job worker is registered, or by the principal, if the job worker is not registered.

Levy and Collection of Tax on supply of services by Job worker:

The concept of supply has been adopted to levy tax in place of manufacture of excisable goods and supply of taxable services. Section 7 of CGST Act, for the purpose of expression of “Supply” includes as specified at sub-section (d) that “the activities to be treated as supply of goods or supply of services as referred to in Schedule II”.

Schedule II of Section 7 provides the activities to be treated as supply of goods or supply of services and schedule II (3) any treatment or process which is applied to another person’s goods is a supply of services.

Thus, Job work process has carried by the Job worker on behalf of the principal and will attract GST on job work Charges, in case of threshold limit of Rs.20 lakh of aggregate turnover exceeds in a financial year of a job worker. If the aggregate turnover exceeds the threshold limit the job worker would be required to obtain registration under section 25.

Further, the value of goods or services used by the job worker for carrying out the job work will be included in the value of services supplied by the job worker. After completion of job work, if the goods directly supply to the customers from the premises of the job worker , the value of such supply will be included in the aggregate turnover of the principal.

It is to be noted that in the erstwhile Central Excise and Service Tax provisions where job work charges or supply of services are subject to service tax only, if the process carried by job worker does not amount to manufacture.

Board clarification on various provisions related to job work:-

Further, the Board of Indirect Taxes and Customs vide its Circular No. 38/12/2018 dated 26th March 2018 has clarified the various issues have been raised by taxpayers regarding the procedures to be followed for job work and the related compliances requirement for the principal and the job worker. The gist of the said circular with various procedures to comply legal requirements for job work has been summarized as under:

1. Scope / ambit of job work :

The job worker is expected to work on the goods sent by the principal. Whether the activity is covered within the scope of job work or not would have to be determined on the basis of facts and circumstances of each case. Further, it is clarified that the job worker, in addition to the goods received from the principal, can use his own goods for providing the services of job work.

2. Requirement of registration for the principal / job worker :

The provisions of section 143 of the CGST Act are applicable to a registered person and it is only a registered person can send the goods for job work under said provisions. It is choice of registered person to avail or not to avail of the benefit of these special provisions of job work.

With regard to registration of job worker , when the job worker and principal are located in the same State in that case job worker is required to take registration only if his aggregate turnover in a financial year has exceeded the threshold limit of registration. Where the principal and the job worker are located in different States, the requirement of registration flows from clause (i) of section 24 of the CGST Act which provides for compulsory registration any inter-State supply of taxable services irrespective of threshold limit of registration. However, exemption from mandatory registration has granted vide Notification No. 10/2017- Integrated Tax dated 13.10.2017 in case of inter-State of supply of services. Hence, a job worker is required to take registration only in cases where his aggregate turnover, to be computed on all India basis, in a financial year exceeds the threshold limit regardless of whether the principal and the job worker are located in the same State or in different States.

3. Documents required for movement of goods for Job working :

(i) By the Principal to job worker

The principal shall move goods to job worker under cover of Challan in terms of rules 45 and 55 of the CGST Rules. The challan meant for job work shall be prepared in triplicate. Two copies of the challan may be sent to the job worker along with the goods. The job worker should send back one copy of the said challan to the principal along with the processed goods on completion of the job work. The FORM GST ITC-04 will serve as the intimation as envisaged under section 143 of the CGST Act, 2017.

(ii) From one job worker to another job worker :

The goods may move under cover of challan issued either by the principal or the job worker. Alternatively, the challan issued by the principal may be endorsed by the job worker indicating the quantity and description of goods being sent.

(iii) From Job worker to the principal:

The job worker should send one copy of the challan received by him from the principal while retuning the goods to the principal after carrying out the job work.

(iv) From supplier to the job worker:

As per instruction of the principal , the supplier may move goods from his premises to job worker premises with a copy of the invoice issued by the supplier in the name the principal as buyer and job worker ‘s name and address should be mentioned as the consignee, in terms of rule 46(o) of the CGST Rules. The principal shall issue the challan under rule 45 of the CGST Rules and send the same to the job worker directly. In case of import of goods by the principal, after customs clearances of imported goods move directly from Customs station of import to premises of job worker with a copy of Bill of Entry and the principal shall issue challan under rule 45 of the CGST Rules and the challan send directly to the job worker.

(v) In piecemeal return by the job worker:

After completion of job work, if the piecemeal quantities are return by the job worker to another job worker or to the principal, the challan issued originally by the principal cannot be endorsed and a fresh challan is required to be issued by the job worker.

(vi) Submission of intimation :

It is clarified that it is the responsibility of the principal to include the details of all the challan relating to goods sent by him to one or more job worker or from one job worker to another and its return therefrom. The FORM GST ITC-04 will serve as the intimation as envisaged under section 143 of the CGST Act.

4. Liability to issue invoice , time of supply and value of supply clearance from the job worker premises / place of business :

(i) Supply of job work services :

The job worker, as a supplier of services, is liable to pay GST, if he is liable to be registered under section 25 of the CGST Act. He shall issue an invoice at the time of supply of the services as determined in terms of section 13 read with section 31 of the CGST Act. The value of services would be determined in terms of section 15 of the CGST Act and would include not only the service charges but also the value of any goods or services used by him for supplying the job work services, if recovered from the principal.

It is clarified that the value of moulds and dies, jigs and fixtures or tools provided by the principal may not be included in the value of job work services provided its value has been factored in the price for the supply of such services by the job worker.

(ii) Supply of goods by the principal :

Since the supply is being made by the principal, it is clarified that the time , value and place of supply would have to be determined in the hands of the principal irrespective of the location of the job worker’s place of business/ premises. Further, the invoice would have to be issued by the principal. It is also clarified that in case of exports directly from the job worker’s place of business / premises, the LUT or bond, as the case may be, shall be executed by the principal.

(iii) Supply of waste and scrap generated during the job work:

The waste and scrap generated during the job work may be supplied by the registered job worker directly from the place of business or by the principal if job worker is not registered under GST.

5. Violation of conditions laid down in section 143 :

As per provisions contained in section 143 of the CGST Act, If the inputs or capital goods are neither returned to the principal nor supplied from the job worker premises within one year in case of inputs and three years in case of capital goods, the principal would issue an invoice for the same, pay GST and declare such supplies in his return for the particular month. If such goods are returned by the job worker after stipulated time, the same shall be treated as supply and job worker is liable to pay GST if the job worker not registered in that case principal have to pay GST on reverse charge basis as per section 9(4) of the CGST Act. However, the said provision has been kept in abeyance till October, 2018. Further, there is no requirement of returning back or supplying the goods from the job worker’s premises in case of moulds, dies, jigs, tools and fixtures are concerned.

6. E-Way Bill movement of goods for job work :

An e-way bill is required to be generated by every registered person causes movement of goods of consignment value exceeding fifty thousand rupees. However, for inter-State movement of goods e-way bill shall be generated either the principal or by the registered job worker irrespective of the value of the consignment.

7. Availability of input tax credit by the principal or job worker :

It is clarified that, in view of the provisions contained in clause (b) of sub-section (2) of section 16 of the CGST Act, the input tax credit would be available to the principal, irrespective of the fact whether the inputs or capital goods are received by the principal and then sent to the job worker’s place of business, without being brought to the premises of the principal. It is also clarified that the job worker is also eligible to avail ITC on inputs, etc. used by him in supplying the job work services if he is registered under GST.

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