PROVISION RELATING TO JOB WORK
- What is Job work
- Job work procedural aspect
- Conditions and restrictions in respect of inputs and capital goods sent to the job worker (challan issued by principal at the time of goods sending for job work)
- Input Tax credit on goods supplied to job worker
- Time Limits for the return of processed goods
- Extended meaning of input
- Waste clearing provisions
Job-work sector constitutes a significant industry in Indian economy. It includes outsourced activities that may or may not culminate into manufacture. The term Job-work itself explains the meaning. It is processing of goods supplied by the principal. The concept of job-work already exists in Central Excise, wherein a principal manufacturer can send inputs or semi finished goods to a job worker for further processing. Many facilities, procedural concessions have been given to the job workers as well as the principal supplier who sends goods for job-work. The whole idea is to make the principal responsible for meeting compliances on behalf of the job-worker on the goods processed by him (job-worker), considering the fact that typically the job-workers are small persons who are unable to comply with the discrete provisions of the law.
The GST Act makes special provisions with regard to removal of goods for job-work and receiving back the goods after processing from the job-worker without the payment of GST. The benefit of these provisions shall be available both to the principal and the job worker.
What is job-work?
Section 2(68) of the CGST Act, 2017 defines job-work as 'any treatment or process undertaken by a person on goods belonging to another registered person'. The one who does the said job would be termed as 'job worker'. The ownership of the goods does not transfer to the job-worker but it rests with the principal. The job worker is required to carry out the process specified by the principal on the goods.
Job-work procedural aspects
Certain facilities with certain conditions are offered in relation to job-work, some of which are as under:
a) A registered person (Principal) can send inputs/capital goods under intimation and subject to certain conditions without payment of tax to a job-worker and from there to another job-worker and after completion of job-work bring back such goods without payment of tax. The principal is not required to reverse the ITC availed on inputs or capital goods dispatched to job-worker.
b) Principal can send inputs or capital goods directly to the job-worker without bringing them to his premises and can still avail the credit of tax paid on such inputs or capital goods. However, inputs and/or capital goods sent to a job worker are required to be returned to the principal within 1 year and 3 years, respectively, from the date of sending such goods to the job-worker.
c) After processing of goods, the job-worker may clear the goods to-
(i) Another job-worker for further processing
(ii) Dispatch the goods to any of the place of business of the principal without payment of tax
(iii) Remove the goods on payment of tax within India or without payment of tax for export outside India on fulfillment of conditions.
The facility of supply of goods by the principal to the third party directly from the premises of the job worker on payment of tax in India and likewise with or without payment of tax for export may be availed by the principal on declaring premise of the job-worker as his additional place of business in registration. In case the job-worker is a registered person under GST, even
declaring the premises of the job-worker as additional place of business is not required.
Before supply of goods to the job-worker, the principal would be required to intimate the Jurisdictional Officer containing the details of the description of inputs intended to be sent by the principal and the nature of processing to be carried out by the job-worker. The said intimation shall also contain the details of the other job-workers, if any.
The inputs or capital goods shall be sent to the job worker under the cover of a challan issued by the principal. The challan shall be issued even for the inputs or capital goods sent directly to the job-worker. The challan shall contain the details specified in Rule 10 of the Invoice Rules. The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal.
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.
Rule 55. Transportation of goods without issue of invoice.- (challan issued by principal when goods send to job worker)
(1) For the purposes of
(a) supply of liquid gas where the quantity at
the time of removal from the place of business of the supplier is not known,
(b) transportation of goods for job work,
(c) transportation of goods for reasons other than by way of supply, or
(d) such other supplies as may be notified by the Board,
the consigner (Principal) 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:-
- date and number of the delivery challan;
- name, address and Goods and Services Tax Identification Number of the consigner, if registered;
- name, address and Goods and Services Tax Identification Number or Unique Identity Number of the consignee, if registered;
- Harmonised System of Nomenclature code and description of goods;
- quantity (provisional, where the exact quantity being supplied is not known)
- taxable value
- 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;
- place of supply, in case of inter-State movement; and
(2) The delivery challan shall be prepared in triplicate, in case of supply of goods, in the following manner, namely:-
(a) the original copy
being marked as ORIGINAL FOR CONSIGNEE;
(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNER.
(3) Where goods are being transported on a delivery challan in lieu of invoice, the same shall be declared as specified in rule 138.
(4) Where the goods being transported are for the purpose of supply to the recipient but the tax invoice could not be issued at the time of removal of goods for the purpose of supply, the supplier shall issue a tax invoice after delivery of goods.
(5) Where the goods are being transported in a semi knocked down or completely knocked down condition -
(a) the supplier shall issue the complete
invoice before dispatch of the first consignment;
(b) the supplier shall issue a delivery challan for each of the subsequent consignments, giving reference of the invoice;
(c) each consignment shall be accompanied by copies of the corresponding delivery challan along with a duly certified copy of the invoice; and
(d) the original copy of the invoice shall be sent along with the last consignment
(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-04furnished for that period on or before the twenty-fifth day of the month succeeding the said quarter. (25th end of the 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,- (1) the expressions “capital goods” shall include “plant and machinery” as defined in the Explanation to section 17; (2) 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.
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.
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.
Extended meaning of input
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 job-worker.
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.