What do you mean by Job work in GST?
For work to be treated as Job work under gst following conditions needs to be satisfied:
- Two Persons – Principal and Job worker
- The goods should belong to another GST registered person (principal)
- Treatment or process to be undertaken on the said goods shall be by the job worker, whether registered or not
Any treatment or process which is applied to another person’s goods is a supply of services.Job work is Supply of Services
What is the procedure for Job work under GST?
The principal may under intimation send any inputs, semi-finished goods or capital goods without payment of tax to a job worker for job work and from there subsequently send to another job worker and likewise.
The principal can send goods for job work purpose without payment of GST under the cover of delivery challan, prepared in triplicate, two copies of which may be sent to the job worker along with goods.
Details of delivery challan generated by the principal for the job work are also required to be furnished in Form GSTR-1.
The principal is required to file Form GST ITC-04 by the 25th day of the month succeeding the quarter (inserted wef 01.04.2019)
When the principal and the job worker are situated inter-state, job work transactions, e-way bill must be generated for inter-state movement of goods irrespective of the monetary limit.
Input credit to Principal
The principal is allowed to take credit on inputs / capital goods sent to the job worker (even in case, vendor has sent goods directly to job worker)
On the job work charges, GST will be charged by the job worker if the job worker is registered. Input Tax Credit of the same can also be availed by the principal.
What happens when goods are not returned in time?
Principal should receive back Input within 1 year and Capital Goods within 3 years. Though, for moulds and dies, jigs and fixtures or tools there is no time limit.
Where goods are not returned in prescribed period, the principal has to issue invoice and declare such supplies in his return for that particular month in which the time period of one year / three years has expired. The date of supply shall be the date on which such inputs or capital goods were initially sent to the job worker. Since date of invoice will be of current period, the job worker is eligible to avail the credit of the same.
For example – If the capital goods are not returned within 3 years, then the same shall be treated as “supply” from the date the said capital goods were sent out. The said supply shall be declared in FORM GSTR-1 and the principal shall be liable to pay the tax along with applicable interest.
Value of such deemed supply will be the value declared in the challan by the principal while sending the goods to job worker i.e., without including cost of transportation and job work charges.
Moreover, the job worker has to pay the said amount to the principal. The same may be done by way of making payment in cash or returning the said goods as supply of the job worker. For this, the job worker has to raise his own tax invoice stating principal as buyer.
Receiving Back Material
Inputs or Capital goods can be received back at the principal place of business or even at any of the place registered as an additional place of business.
After completion of the job work, the job worker shall return the said goods to the principal’s premises under delivery challan and prepare his invoice for job work charges. While returning the goods after completion of job work, to the principal, the job worker should send one copy of the challan received by him from the principal
Further, after the completion of job work, such goods can be directly supplied from the place of the job worker to the customer if :
(a) the job worker is registered; or
(b) the job worker is not registered but his place of business is declared as additional place of business by the principal.
Few points to note:
- Where principal sends his goods for testing or labelling to another person, the same will be treated as “treatment or process”
- The job work provisions are facilitative procedures enumerated in law, assessee has choice to opt for the same or not.
- It is clarified that the job worker, in addition to the goods received from the principal, can use his own goods for providing the services of job work.
- If goods are lost or destroyed, the principal is required to reverse the credit on inputs or capital goods, and it will not be treated as deemed supply.
- The principal shall be responsible for keeping proper accounts for the inputs or capital goods or waste / scrap lying with the job-worker.
What are GST related provisions applicable on Job worker?
The job worker shall be liable to be registered under GST if his aggregate turnover in a financial year exceeds Rs. 20 lakh/Rs. 10 lakh in special category States (the value of the goods supplied by the principal shall not be included in the aggregate turnover of the registered job worker)
On the job work charges, GST will be charged by the job worker if the job worker is registered. Input Tax Credit of the same can be availed by the principal.
But in a case where an unregistered job-worker receives goods from an unregistered principal then this benefit will not be available to him and value of the supply of goods of unregistered principal, after completion of job work, by the job-worker shall be treated as the supply of goods by him and the value of such goods shall be included in the aggregate turnover of the job worker. As a result, the job-worker’s aggregate turnover may cross the threshold and become liable to be registered.
Waste and Scrap
If the job worker is registered, then it can be supplied by the job worker directly from his place of business, on payment of appropriate tax applicable on the said waste / scrap.
If he is not registered, then the waste / scrap generated should be returned to the principal along with the goods and such waste / scrap would be supplied by the principal on payment of tax. Alternatively, the principal may supply waste / scrap directly from premises of the job worker under his invoice on payment of tax.