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Central Board of Excise and Customs (CBEC) has issued circular no. 38/12/2018 dated 26 March 2018, clarifying various issues pertaining to job work transactions.

Job worker is allowed to use his own goods for providing job work services, in addition to the goods received from the principal.

Registration of  job worker

Job worker is required to obtain registration in cases, where his aggregate turnover on all India basis exceeds the threshold limit. In case of inter-State job work, while it is mandatory to obtain registration in case of inter State supplies, the job worker can claim relief under notification no. 10/2017- Integrated Tax dated 13 October2017, which provides exemption from registration in case of inter-State supply of services from registration up to specified limits.

Supply of inputs/ capital goods by principal to job worker

Sending goods to a job worker is not supply as such. However, it acquires the character of supply when the inputs/ capital goods (other than moulds and dies, tools etc.) sent by the principal for job work are not received back or further supplied by the principal within the specified time i.e. one year and three years from the date when it was sent out to the job worker.

In such cases, return of goods by the job worker would also be treated as a supply liable to Goods and Service Tax (GST). The job worker would be liable to pay GST if he is liable to be registered (if he crosses the threshold limit for registration), else, the principal has to pay GST on reverse charge basis.

Further, in such cases, the principal would need to consider such goods delivered to the job worker as a supply made on the date of original delivery of the goods to the job worker and to be disclosed in the return for the period in which the period of one year/ three year expires. The principal will be required to pay tax along with interest for the intervening period.

Documents for movement of goods to and from job worker

The principal has to issue a delivery challan for sending the goods to a job worker. Subsequent dispatch of goods from one job worker to another job worker can be done on the basis of fresh delivery challan issued by the first job worker or he can endorse the original delivery challan issued by the principal to next job worker.

 In case of direct delivery by the supplier of the goods to the job worker on behalf of the principal, the job worker’s name and address should be mentioned as consignee on the supply invoice.

GST Form ITC-04, which the principal is required to file every quarter, would be treated as an intimation under section 143 of the Central GST Act(CGST Act).

Input tax credit on inputs/ capital goods procured

The principal would be eligible to claim credit of GST charged on the inputs/ capital goods, irrespective of whether such goods are received by the principal and delivered to the job worker by him or directly delivered to the job worker by the original supplier.

Further, the job worker can claim credit on inputs etc. used by him to supply job work services.

Direct supply of goods from job worker premises

Direct supply of goods from job workers premises by the principal would be regarded as supply by the principal and not by job worker. In such cases, all the compliances would need to be made by the principal, as he is the supplier. As per the illustration provided in the circular, the supply would be recorded in the State in which the principal is located.

Waste and scrap generated during the job work can be supplied by the job worker directly from his place of business if he is registered. If he is unregistered, the principal can also supply such waste and scrap from job worker premises.

Value of job work services

The 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 the 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 for such supply.

Accordingly, value of any moulds and dies, tools etc. provided by the principal to the job worker may not be included in the value of the supply of job work services by the job worker, if its value has been factored in the price for job work services.


The circular comprehensively seeks to clarify many issues which the industry has been debating with respect to job work transactions. The circular specifically mentions that the principal is not obligated to follow the job work provisions and it is his choice whether or not to avail the benefit of these special provisions.

Where the goods sent by principal is treated as a supply (in case of non-receipt of goods sent etc.) the job worker should be entitled to credit on the GST paid by principal. However, the circular does not specifically clarify this aspect.

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