1. MEANING OF JOB WORK UNDER GST

The manufacturer (principal) may send his goods to a job worker on contract basis after the purchase of inputs and/or capital goods for initial processing, packing or any other process of completion & then supply such goods to its customers or use any other manufacturing processes accompanied by its own.

The goods sent for job work maybe raw materials, component parts or even semi-finished goods. The resultant goods could be with same characteristics or with variation of the product send for job work.

If the principal is an unregistered taxable person then the job work relation could not be established under GST law. Further, goods sent for job work should be taxable goods as duty liability will arise only when goods under consideration are taxable.

2. COMPLIANCE FOR JOB WORK UNDER GST

1.     Delivery Challan must be attached along with Goods send out for Job Work.
2.    The Principal shall

 

·         Receive the goods after processing from the job worker OR

·         Supply to his customers from the place of business of the job worker.

In both the cases, ITC paid on purchase of goods sent on job work will be allowed to the principal.

3.    Goods sent must be received back by the principal within the time period specified below:

 

·         Capital Goods within 3 years

·         Inputs, semi-finished or finished goods within 1 year

Being sent out by the principal to the job worker.

In case of goods sent, have not been received back within the time period specified above, then such goods will be treated as the principal supplied goods to the job worker. Tax is required to be paid by the principal on such deemed supply.

4.    Waste and scrap generated during the initial process, intermediate process, assembly, packing or any other completion process may be sold on payment of tax by:

 

·         Principal- if job worker does not hold a registration.

·         Job worker- if he holds a registration.

It is necessary to follow the compliance procedures for Job Work under GST.

3. TRANSITION PROVISION UNDER GST 

Inputs, semi-finished goods or Finished goods Removed for Job work Before the appointed date of carrying certain processes and returned on or after the appointed date;

  • In case any inputs or semi-finished goods is removed before the appointed date from the factory of the manufacturer (principal) and is sent to a job worker for further processing or for a similar purpose, and the same is received on or after the appointed date,

Then no tax shall be payable if the following conditions are satisfied:

  • Underlying goods are returned to the factory within 6 months from the appointed date (extendable for at most2 months).
  • Declaration of the goods held by job worker is submitted in specified Form and manner.
  • Supply of semi-finished goods or finished goods to Principal’s Customers is done only on payment of tax in India or the goods are exported out of India within 6 months from the appointed date (extendable for at most2 months).

If the underlying inputs, semi-finished goods or finished goods are not returned within 6 months or extended period, ITC availed earlier under existing laws will be recovered.

4. RATES FOR JOB WORK UNDER GST

The General Rate for Job Work under GST is 18%.

The rate of Composite supply of Works Contract as defined in the clause 119 of section 2 of CGST act (definition of the term ‘Works Contract’ under CGST act) – 18% with full ITC.

The services by way of Job work in relation to-

  1. Textile yarns (other than man-made fibre) & fabrics – 5% with Full ITC.
  2. Processing of Leather – 5% with Full ITC.

Service tax exemptions to be continued in GST, as decided by the GST council

  • Services provided by way of pure labour of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of a civil structure or any other original works pertaining to the beneficiary-led individual house construction/enhancement under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY).
  • Services provided by way of pure labour of construction, erection, commissioning, or installation of Original works pertaining to a single residential unit otherwise than as a part of a residential complex.

5. INPUT CREDIT ON JOB WORK UNDER GST 

The principal is eligible for ITC on the inputs and capital goods sent for job work.

WHEN INPUTS OR CAPITAL GOODS ARE SENT FOR JOB WORK

No tax is applicable when Inputs or Capital Goods are sent for Job work. The Principal must Issue a Delivery Challan while removing the goods for job work.

WHEN INPUTS OR CAPITAL GOODS SENT FOR JOB WORK ARE BROUGHT BACK WITHIN 1 YEAR OR 3 YEARS, RESPECTIVELY

-No Tax is applicable.

WHEN INPUTS OR CAPITAL GOODS SENT FOR JOB WORK ARE SUPPLIED FROM THE JOB WORKER’S PLACE WITHIN 1 YEAR OR 3 YEARS RESPECTIVELY

When inputs or capital goods sent for job work are supplied from the job worker’s place of business within 1 year or 3 years respectively, TAX IS APPLICABLE if the supply is within India.

If the supply is for export, no tax is applicable.

For supplying inputs or capital goods from the job worker’s place of business, the principal has to declare the job worker’s place of business as his additional place of business, unless-

  1. The job worker is registered OR
  2. The supply is of notified goods

When goods are supplied from the job worker’s place of business, even if the job worker is registered, the supply will be treated as supply by the Principal and the value of the goods will not be included in the job worker’s aggregate turnover.

WHEN INPUTS OR CAPITAL GOODS SENT FOR JOB WORK ARE NOT BROUGHT BACK OR SUPPLIED FROM THE JOB WORKER’S PLACE WITHIN 1 YEAR OR 3 YEARS RESPECTIVELY

When inputs sent for job work are not brought back or supplied from the job worker’s place of business within 1 year of their being sent for job work, or if capital goods sent for job work are not brought back or supplied from the job worker’s place of business within 3 years, they will be considered to have been supplied by the principal to the job worker on the day they were sent out. Hence, the Principal will be liable to pay tax on the supply, along with the interest due.

The inputs or capital goods can be sent to the job worker without first bringing them to the principal’s place of business. In this case, the period of 1 year and 3 years respectively, will be counted from the date when the job worker receives the inputs or capital goods.

PROCESSING CHARGES CHARGED BY JOB WORKER

-GST is applicable on processing charges charged by the job worker.

-No tax is applicable on moulds and dies, jigs and fixtures or tools sent to a job worker for job work.

Be Peaceful !!!