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As per Section 19 of CGST Act

1. The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on inputs sent to a job worker for job work.

2. Notwithstanding anything contained in clause (b) of sub-section (2) of section 16 (received at place of business), the principal shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job work without being first brought to his place of business.

3. 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.

4. The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on capital goods sent to a job worker for job work.

5. Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the principal shall be entitled to take credit of input tax on capital goods even if the capital goods are directly sent to a job worker for job work without being first brought to his place of business.

6. 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.

Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies, jigs and fixtures, or tools sent out to a job worker for job work. (because these tools are consumable nature) Explanation. For the purpose of this section, 'principal' means the person referred to in section 143.

Rule 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.

Explanation.- For the purposes of this Chapter,-

I. the expressions 'capital goods' shall include 'plant and machinery' as defined in the Explanation to section 17;

II. for determining the value of an exempt supply as referred to in sub-section (3) of section 17-

a) the value of land and building shall be taken as the same as adopted for the purpose of paying stamp duty; and
b) the value of security shall be taken as one per cent. of the sale value of such security.

As per Section 143

A registered person (hereafter in this section referred to as the 'principal') may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall, -

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:

Provided that the principal shall not supply the goods from the place of business of a job worker in accordance with the provisions of this clause unless the said principal declares the place of business of the job worker as his additional place of business except in a case -

  1. where the job worker is registered under section 25; or
  2. where the principal is engaged in the supply of such goods as may be notified by the Commissioner.

1. The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal.

2. 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.

3. 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 goods were sent out.

4. 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.

Explanation - For the 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.

Author analysis-

It is also pertinent to add here that the provisions relating to job work are applicable only when registered taxable person intends to send taxable goods for job work to the job worker. 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. The principal can send the inputs or capital goods after payment after payment of GST without following the special procedure. In such a case, the job-worker would take the input tax credit and supply back the processed goods (after completion of job work) on payment of GST.

It is also not necessary that job worker and principal be located in same state or Union territory Provisions relating to job work have been adopted in the IGST Act, 2017 (vide Section 20) as well as in UTGST Act, 2017 (vide Section 21). Therefore, job worker and principal can be located either in the same State or in same Union Territory or in difference States or Union Territories.

Extended Meaning of 'Input'

For the purpose of job work, the term 'Input' has been given an extended meaning and shall include

  1. Input sent as such i.e. without carrying out any process on such input; and
  2. Intermediate goods arising from any treatment or process carried out on the input. The said treatment or process may be carried out either by the principal or by the Job worker
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