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All About Levy of GST on Job-work

Value for the purpose of payment of GST on Job work: As per the provisions of Section 15 of CGST Act, 2017, the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

Levy of GST on Job-work:

Section 2(68) of the CGST Act, 2017 defines job-work as under: (68) “job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly; The job-worker is required to carry out the process specified by the principal on the goods.

 Thus for the levy of GST, As per Section 7 of the Act, supply” includes

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;.

 (b) Import of services for a consideration whether or not in the course or furtherance of business; (c) The activities specified in Schedule I, made or agreed to be made without a consideration; and

 (d) The activities to be treated as supply of goods or supply of services as referred to in Schedule II.

As per Schedule II of CGST Act, 2017, Treatment or process any treatment or process which is applied to another person’s goods is a supply of services. The ownership of the goods does not transfer to the job-worker but it rests with the principal. Thus Job work is a service. In view of the above facts the “job worker is required to obtain registration”, if his aggregate turnover exceeds the prescribed threshold and follow the various procedure as per the provisions of CGST Act, 2017 and rules made there under.

Value for the purpose of payment of GST on Job work:

As per the provisions of Section 15 of CGST Act, 2017, the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

 As per Explanation (ii) to Section 22, of CGST, Act, 2017 the supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker.

Explanation.––For the purposes of this section,––

  • The expression “aggregate turnover” shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals;
  • (ii) the supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker;

The value of goods after completion of job work is not includible in the turnover of the job-worker. It will be treated as supply of goods by the principal and will accordingly be includible in the turnover of the Principal.

Rate of GST for Job work:

Chapter, Section or Heading Description of Service Rate of CGST
Heading 9988 (Manufacturing services on physical inputs (goods) owned by others) (i) Services by way of job work in relation to-

(a) Printing of newspapers;

(b) Textile yarns (other than of man-made fibres) and textile fabrics;

(c) Cut and polished diamonds; precious and semiprecious stones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975);

(d) Printing of books (including Braille books), journals and periodicals;

(e) Processing of hides, skins and leather falling under Chapter 41 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975). Explanation.- “man-made fibres” means staple fibres and filaments of organic polymers produced by manufacturing processes either,-

(a) by polymerisation of organic monomers to produce polymers such as polyamides, polyesters, polyolefins or polyurethanes, or by chemical modification of polymers produced by this process

[for example, poly(vinyl alcohol) prepared by the hydrolysis of poly(vinyl acetate)]; or (b) by dissolution or chemical treatment of natural organic polymers (for example, cellulose) to produce polymers such as cuprammonium rayon (cupro) or viscose rayon, or by chemical modification of natural organic polymers (for example, cellulose, casein and other proteins, or alginic acid), to produce polymers such as cellulose acetate or alginates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.5 %

  (ii) Manufacturing services on physical inputs (goods) owned by others, other than (i) above 9%

 

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.

Removal of intermediate product to Job worker:

As per the explanation provided in Section 143 of the CGST Act, 2017, where certain process is carried out on the input before removal of the same to the job-worker, such product after carrying out the process is to be referred as the intermediate product. Such intermediate product can also be removed without the payment of tax. Therefore, both input and intermediate product can be cleared without payment of duty to jobworker. Waste clearing provisions Pursuant to Section 143 (5) of the CGST Act, 2017, waste generated at the premises of the job-worker may be supplied directly by the registered job-worker from his place of business on payment of tax or such waste may be cleared by the principal, in case the job-worker is not registered.

Transitional provisions :-

Inputs, as such, or partially processed inputs which are sent to a job-worker prior to introduction of GST under the provisions of existing law [Central Excise] and if such goods are returned within 6 months from the appointed day [i.e. the day on which GST will be implemented] no tax would be payable. If such goods are not returned within prescribed time, the input tax credit availed on such goods will be liable to be recovered.

If the manufactured goods are removed, prior to the appointed day, without payment of duty for testing or any other process which does not amount to manufacture, and such goods are returned within 6 months from the appointed day, then no tax will be payable.

 For the purpose of these provisions during the transitional period, the manufacturer and the job-worker are required to declare the details of such goods sent/received for jobwork in prescribed format GST TRAN-1, within 90 days of the introduction of GST.

Time Limits for the return of processed goods :-

 As per section 19 of the CGST Act, 2017, inputs and capital goods after processing shall be returned back to principal within one year or three years respectively of their being sent out. Further, the provision of return of goods is not applicable in case of moulds and dies, jigs and fixtures or tools supplied by the principal to job-worker.

Central Goods and Services Tax Rules 2017 relating to Job work:

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

(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-1 and the principal shall be liable to pay the tax along with applicable interest.

The author can be reached at pankajsharmaupw@gmail.com

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