JOB WORK UNDER GST
One of the significant industry in an Indian economy is job work. It is processing of goods supplied by the principal, wherein principal sends goods to a job worker for further processing. As job workers are small persons who are unable to comply with the provisions of law, principal is responsibility for all the compliances.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 payment of GST. Benefits of these provisions shall be available to both principal and the job worker.
Section 2(68) of the CGST Act, 2017 defines job work as 'any 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.
Procedural Aspects:
- Principal can send 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.
- Principal can send inputs or capital goods directly to the job worker without bringing them to his premises, still the principal can 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.
- After processing of goods, the job worker may clear the goods to –
- Another job worker for further processing
- Dispatch the goods to any of the place of business of the principal without payment of tax
- 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 principal to the third party directly from the premises of the job worker on payment of tax in India likewise with or without payment of tax for export may be availed by the principal on declaring the premise of 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 job worker as additional place of business is not required.
Before supply of goods to job worker, principal would be required to intimate the Jurisdictional Officer containing the details of 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 another job worker, if any.
The 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 goods sent directly to the job worker. The challan shall contain the details specified in the invoice rules.
The responsibility for keeping proper accounts for the goods shall lie with the principal.
Input tax credit on goods supplied to job worker
Section 19 of CGST Act, 2017 provides that the principal 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 bringing 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 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 1 year or 3 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 to be referred as the intermediate product. Such intermediate product can also be removed without payment of tax. Therefore, both input and intermediate product can be cleared without payment of duty to job worker.
Waste clearing provisions
Waste generated in 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.
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