A DETAILED ANALYSIS OF JOB WORK UNDER GST
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 a ‘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
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 brings back such goods without payment of tax. The principal is not required to reverse the ITC availed on inputs or capital goods sent to job-worker.
(b) Principal can send inputs or capital goods directly to the job-worker without bringing them to his premises, still the principal can avail the ITC of tax paid on such inputs or capital goods.
(c) 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 [the period of one year and three years may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.]
(d) After processing of goods, the job-worker may clear the goods to-
- another job-worker for further processing;
- send the goods to any of the places 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 specified 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 premises 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 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 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 55(1) of the CGST Rules, 2017.
Input Tax Credit On Supply Of Goods To Job Workers
The job worker is entitled to claim an input tax credit on the inputs and input services used in the job work process. The input tax credit can be claimed on the GST paid on the inputs and input services, subject to the conditions specified under the GST laws.
The GST laws specify a time limit for the return of the processed goods to the registered person. The processed goods i.e capital goods and input goods must be returned within a period of three years & one year from the date of their dispatch to the job worker. If the processed goods are not returned within this time limit, the job worker will be liable to pay GST on the supply of the goods.
Rules For The Movement Of Goods
The job worker is required to follow specific rules for the movement of goods between the registered person and the job work premises. The registered person is required to issue a challan, or an invoice, for the movement of the goods to the job worker. The challan must include the GSTIN of the registered person, the date of the challan, the quantity and description of the goods, and the signature of the registered person or their authorized representative.
Maintenance of records and documents
The job worker is required to maintain proper records and documents for the job work activities. These records must include the details of the goods received, the details of the job work carried out, and the details of the goods returned to the registered person. The job worker is also required to issue a certificate to the registered person, stating the details of the job work carried out and the goods returned.
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 the 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 molds 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 a certain process is carried out on the inputs before removal of the same to the job-worker, such product after carrying out the process is referred to as the intermediate product. The such intermediate product can also be removed without the payment of tax. Therefore, both inputs and intermediate products can be cleared without payment of tax 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. The Board vide Circular No. 38/12/2018 dated 26.03.2018 has elaborately clarified many issues related to Job-work. Circular No. 88/07/2019 dated 01.02.2019 has amended certain portions of earlier Circular No. 38/12/2018 dated 26.03.2018. Circular No. 126/45/2019-GST dated 22.11.2019 has clarified the scope of certain notification entries, related to job work, of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.