Job work and its procedure under GST
Job work means any treatment or process or work on the goods owned by another person. In other words, doing work or treatment on goods and materials –
- to transfer or use for another process, or
- to convert it to finished goods.
The person doing job work activity is known as job worker.
The person for whom the activities are done is known as principal
For example, BabaTax is a furniture dealer. BabaTax sends its furniture to Y Ltd. for further polishing the furniture and sells directly to customer from Y Ltd. place.
BabaTax is the principal.
Y Ltd is the job worker.
Polishing the furniture will be the job work.
Whether the principal can send goods to job worker without payment of tax?
Yes, the principal can send the goods without payment of tax to job worker. Also the goods can be sent from one job worker to another job worker. After completion of job work bring back goods without payment of tax.
Can the principal send both input goods and capital goods directly to a job work?
Yes, the principal can send both input goods as well as capital goods directly to the job worker without bringing them to the own premises.
Can the the principal avail input tax credit (ITC) paid on input goods or capital goods on the goods sent to job worker?
Yes, the principal can avail input tax credit paid on the input good and capital goods. However, the condition is goods sent to a job worker must return back to the principal within the specified period.
Input goods – within 1 year from the date of input goods sent for job work.
In case the input goods are sent directly to the job worker’s place then the period of 1 year is calculated from the date of receipt of goods at the job worker’s place.
Capital goods – within 3 years from the date of capital goods sent for job work.
In case the capital goods are sent directly to the job worker’s place then the period of 3 year is calculated from the date of receipt of goods at the job worker’s place.
Example: ABC Limited send raw materials for processing to job worker ‘X’ on 1st November, 2018 . ‘X’ directly received the machine from the seller purchased by ABC Limited on 21st October, 2018 for processing the raw material. ABC Limited received back finished goods on 3rd November, 2019 and machinery on 10th November, 2019.
|Date of sending
|1st November, 2018
|21st October, 2018
|Last day to send back
|31st October 2019
|20th October, 2021
|Date of Goods received
|3rd November, 2019
|10th November, 2019
|Input Tax Available||No||Yes|
|Treatment||Treated as Supply||Not treated as Supply|
As the finished input goods are received beyond the period of one year it will be treated as supply of goods from ABC Limited to Job worker ‘X’. ABC Limited will be required to pay tax tax along with interest.
However machinery is returned within the period of 3 year from the date of receipt of job worker place, it will not treated as supply and input tax credit can be availed.
What if the goods are not received back by the principal within the above mentioned time?
In case the goods are not received back within the specified time limit to the principal, it shall be deemed that the supply is done from principal to job worker. Accordingly the principal would be liable to pay tax to the government along with the interest.
Does the registration is required by the job workers?
Yes if the turnover of the job worker exceeds Rs 20 lakh (10 lakh in special category states) in a financial year.
The job worker who was supplying services interstate are compulsory required to obtain registration?
The job worker who are supplying services interstate are not required to take registration if-
- the turnover limit is below 20 lacs(10 lakh in special category states)
- not involved in supplying services in relation to jewellery , goldsmiths’ and silversmiths’ wares and other related article. (Chapter 71 of the tariff).
Can the goods be supplied directly by job worker’s place to the principal’s customer?
To supply goods directly from job worker premises :
- Job worker requires registration under GST.
- Supply of such goods are notified by Commissioner.
- If not covered under (i) & (ii), the job worker’s place to be included as additional place of business in GSTIN.
The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal. The goods supplied by job worker on behalf of principal within the time limit as discussed above shall not be included in the turnover of job worker.
How to send goods to job worker without payment of tax?
The principal will raise triplicate challan when sending goods to job work,
- one challan is retained by principal
Remaining two challan are sent to the job worker –
- One copy of challan for outward movement (principal to job worker), and
- the other copy of challan for return (job worker to principal).
The challan reference/number will remain the same.
Other types of Documentation:
a) One job worker to another job worker:
Goods may move under the cover of challan issued either by job worker or principal.
b) In piecemeal by job worker:
Goods returned by job worker in installments cannot be endorsed in the delivery challan issued by the principal, job worker requires to raise a fresh challan.
Delivery Challan under GST, contents are listed below:
> Date & number of delivery challan,
> Name, Address & GSIN of consigner & consignee,
> HSN code & description of goods,
> Taxable value,
> Tax rate & Tax amount,
> Place of supply and
Waste and Scrap:
In case of supply of scrap:
- If job worker is registered – Job worker may supply the scrap along with payment under GST.
- If job worker is unregistered – the job worker should return scarp to the principal/ principal may supply the scrap directly from job worker premises under his invoice. (Note: Such premises to be an additional place of business of principal).
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