→According to Section-2(68) of CGST Act, 2017, “Job Work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “Job Worker” shall be construed accordingly.
→Following Conditions must be fulfilled:
1. There must be Two Persons i.e. Job Worker and Principal
2. Principal must be Registered and goods must be belonged to principal
3. Treatment or process to be undertaken on the goods by Job Worker
→Here principal must be a registered person, in a case principal is not a registered person, the activity may qualify as other than job work service and be classified as residual category. If there is no specific rate prescribed then this type of supply may attract a different rate of tax.
→As clarified in Circular No.-38/12/2018 dated 26th March, 2018, job work provisions are facilitative procedures enumerated in law, assessee may have their own choice to opt for the same.
→Further it is clarified by CBIC through a circular that ,”job work” is a process or treatment undertaken by job worker on goods belonging to another registered person (principal). Further it is clarified that job worker can use his own goods in addition to the goods received from principal for providing the service of job work.
⇒Nature of Supply (Calculation of threshold limit):-
→As per explanation (ii) of Section-22 of CGST Act, 2017, the value of the goods supplied by the principal shall not be added in the aggregate turnover of the registered job worker. In result if principal is a registered person than value of goods shall not be included to the turnover of job worker to calculate threshold limit, as the liability to pay tax on goods is of principal.
→But if job worker and principal both are unregistered person then this benefit is not available. The value of supply of goods of unregistered principal, after completion of job work shall be treated as supply of goods made by job worker and the value of such goods shall be included in in the aggregate turnover of job worker.
⇒Section-143-Procedure for supplying goods for job work:-
→Principal can send input/semi-finished goods for a period of 1 year and capital goods for the period of 3 years to the premises of the job worker. Within above time limit principal must have to receive back inputs/semi-finished goods/capital goods at any place of business including additional place of business registered on his name.
→Through the CGST act is amended with effect from 1st February 2019, accordingly the commissioner has been power to extend the time limit for return of inputs/semi-finished/capital goods sent on job work for a further period as given below:
1. For Inputs–additional period of 1 year (totally 2 years)
2. For Capital goods–additional period of 2 years (totally 5 years)
→The principal can send inputs/semi-finished/capital goods for the purpose of job work without payment of GST. However the same should be brought back within 2 years/5 years from the date of goods being sent out. These goods after completion of job work activities can be received back at any registered place of business including additional place of business of the principal.
→In case inputs/semi-finished/capital goods are being sent directly to the job worker than 2 years/5 years shall be counted from the date of the receipt of inputs/semi-finished/capital goods by job worker.
→When such inputs/semi-finished/capital goods are sent from one job worker to another, then also entire process must be completed within 2 years/5 years.
→If the inputs/semi-finished/capital goods are not received back within 2 years/5 years, then the same shall be treated as supply on the date when inputs/semi-finished/capital goods were sent out. It is clarified in Circular No.-38/12/2018 that invoice shall have to be issued by principal the same shall have to be declared in the GSTR-1 of the principal. In result, principal has to pay GST along with interest from the date of removal of inputs/semi-finished/capital goods for the purpose of job work.
→Value of the goods for the above para will be the value declared in the delivery challan without adding transportation cost, at the time of sending the goods to the job worker.
→When goods sent by principal are lost/stolen due to some unavoidable circumstances then the same shall not be treated as supply under Section-19(3), however Section-17(5)(h) shall be applicable and principal is required to reverse the Input Tax Credit (ITC).
→According to case law decided by Hon’ble Supreme Court in the case of Pawan Biscuits & Co. [2000 (120) ELT (24)] if due to some dispute between principal and job worker, goods are not returned by job worker to the principal, and the same is sold by job worker then valuation for the same goods should be considered as transaction value of job worker and not value as declared in delivery challan prepared at the time of sending the goods to job worker.
Moulds, dies, jigs, fixtures, tools:-
→The principal can also send moulds, dies, jigs, fixtures, tools without payment of GST to job worker. In that case time limit of 2 year or 5 years will not be applicable to moulds, dies, jigs, fixtures and tools.
⇒Section-143-Procedure for supplying goods for job work:-
→Section-143 of CGST Act, 2017 allows principal and job worker to move goods from one place to another place without payment of tax subject to some conditions.
→To comply with Section-143 principal should have to file Form GST ITC-04 by 25th day of the month succeeding the quarter. In this, principal has to disclose following particulars:
1. Inputs/Semi finished goods/Capital goods sent to job worker.
2. Inputs/Semi finished goods/Capital goods transferred from one job worker to another.
3. Inputs/Semi finished goods/Capital goods received back from job worker.
→However vide Notification No.-38/2019 dated 31st August, 2019 requirement of filing Form GST ITC-04 has been withdrawn for the period of 1St July, 2017 to 31st March, 2019
→As per Rule-45 the CGST Rules, 2017, the principal can send goods to job worker without payment of GST under the cover of delivery challan and such delivery challan must contain details prescribed under Rule-55 of the CGST Rules, 2017.
→Principal can send Input and capital goods under Section-19(2) and Section-19(5) of the CGST Act, 2017 respectively directly to the place of job worker without receiving it to his own premises and ITC can also be claimed by principal without receiving the goods.
→However this transaction is subject to conditions clarified in Circular No.-38/12/2018, such conditions are,
1. Goods must be moved under cover of invoice issued by supplier in the name of principal and invoice must contain name
and address of the job worker.
2. Principal have to issue challan under Rule-45 of the CGST Rules, 2017 and it must be sent to the job worker.
3. In case of the import goods can directly be sent from the custom station of import to the premises of the job worker with a copy of Bill of Entry and challan issued under Rule-45 of the CGST Rules, 2017.
⇒E-way bill requirement:-
→As per 3rd provision to Rule-138 of the CGST Rules, 2017, E-way bill is mandatory irrespective of any monetary limit, in case the principal and job worker are situated in different state/UT.
⇒Supply of Goods directly from the place of job worker by Principal:-
→After completion of the job work principal can supply such goods directly to his buyer, only if,
1. Job worker is a registered person
2. If job worker is not registered, then premises of the job worker must be declared as additional place of business of principal
→Job worker is liable to get himself registered if his aggregate turnover in state/UT exceeds 20 Lakhs/10 Lakhs (for special category of states).
→As per clause (i) of Section-24 of the CGST Act, 2017 if as service provider supplies any interstate service, then he is required to get himself registered, even though his aggregate turnover does not exceed 20 Lakhs/10 Lakhs (for special category of states).
→However, vide notification No.-10/2017 dated 13th November, 2017 exemption is being given to the job worker from mandatory registration by in the case of interstate supply of job work supply. Hence, job worker is not required to get himself registered even if he is supplying interstate service of job work, until threshold limit of aggregate turnover exceeds 20 Lakhs/10 Lakhs (for special category of states).
⇒Waste and Scrap:-
→In any case mentioned above principal will have to maintain records of clearance of waste and scrap from the premises of the job worker.
⇒Input Tax Credit:-
→According to Section-19(1) of the CGST Act, 2017, principal is eligible to take Input Tax Credit on inputs/semi-finished/capital goods sent to job worker.
→As per Section-19(2) and Section-19(5) of the CGST Act, 2017 principal can take Input Tax Credit on inputs/semi-finished/capital goods even if it is sent directly to the premises of job worker without bringing it to the premises of principal.
→As per Section-19(3) of the CGST Act,2017 if inputs/semi-finished/capital goods are not returned back within 2 years/5 years as the case may be then it becomes liability of principal to pay tax by considering it as deemed supply on the date of movement of goods from principal to job worker. The actual question arises is that “Is job worker eligible to claim Input Tax Credit on deemed supply?”
→As per Section-16(4) of the CGST Act, 2017 a registered person is not entitled to avail ITC after the due date of furnishing of return for the month of September following the end of financial year to which invoice or debit note relates or filing of Annual Return, whichever is earlier. In the case of deemed supply only interest is being calculated from the date of movement of goods from principal to job worker, but tax invoice must be issued of current date.Since, the date of invoice is of current period job worker will be eligible to take ITC.
→As per 2nd proviso to Section-16(2) of the CGST Act, 2017 the job worker has to make payment to the principal. On returning the goods job worker has to issue tax invoice buy considering as supply of goods.
⇒Place of Supply:-
→Place of supply for job work service is very easy. If job worker and principal are situated in the same state/UT then CGST & SGST is to be charged. But if they are located in different state/UT then IGST is to be charged.
→The question of place of supply arises at the time of supply of goods directly from the premises of the job worker.
→Details of delivery challans generated by the principal are required to be given in “Document Summary” window of GSTR-1 of principal.
⇒Rate of GST for job work:-
→Mostly job work activity is covered under SAC 9988. The rates of GST are as follows:-
|Sr. No.||Nature of job work Service||GST Rate [(CGST+SGST)/IGST] (in %)|
|1||Printing of Newspaper||5|
|2||Textile and textile products falling under Chapter-50 to 63 in the First Schedule to the Customs Tarrif Act, 1975||5|
|3||All products falling under Chapter-71 in the First Schedule to the Customs Tarrif Act, 1975||5|
|4||Printing of books (including braille books), journals and periodicals||5|
|5||Printing of all goods falling under Chapter-48 or 49 in the First Schedule to the Customs Tarrif Act, 1975, which attract CGST @ 2.50%. or Nil||5|
|6||Processing of hides, skins and leather falling under Chapter-41 in the First Schedule to the Customs Tariff Act, 1975||5|
|7||Manufacture of leather goods or footwear falling under Chapter-42 or 64 in the First Schedule to the Customs Tariff Act, 1975||5|
|8||All food and food products falling under Chapters-1 to 22 in the First Schedule to the Customs Tariff Act, 1975||5|
|9||All products falling under Chapter-23 in the First Schedule to the Customs Tariff Act, 1975, except dog and cat food put up for retail sale falling under tariff item 23091000 of the said Chapter||5|
|10||Manufacture of clay bricks falling under tariff item 69010010 in the First Schedule to the Customs Tariff Act, 1975||5|
|11||Manufacture of handicraft goods||5|
|12||Manufacture of umbrella||12|
|13||Printing of all goods falling under Chapter-48 or 49 in the First Schedule to the Customs Tariff Act, 1975, which attract CGST @ 6%||12|
|14||Diamonds falling under chapter 71 in the First Schedule to the Customs Tariff Act, 1975||1.50|
|15||Bus body building||18|
|16||Job work services other than specified in Sr. No.-1 to 15 above||12|
|17||Any treatment or process on goods belonging to another person, in relation to printing of newspapers, books (including Braille books), journals & periodicals and all goods falling under Chapter-48 or 49 in the First Schedule to the Customs Tariff Act, 1975, which attract CGST @ 2.50% or Nil||5|
|18||any treatment or process on goods belonging to another person, in relation to printing of all goods falling under Chapter-48 or 49 in the First Schedule to the Customs Tariff Act, 1975, which attract CGST @6%||12|
|20||Manufacturing services on physical inputs (goods) owned by others, other than any of the above||18|