All about job work in GST
Job work in GST is an outsourced activity undertaken by the principal that may or may not culminate into manufacture. For example: An automobile company sends spare parts to a job worker for coating. Coating here is an outsourced activity performed by the third party.
Section 2(68) of CGST Act defines ‘Job work’ as ‘‘any treatment or process undertaken by a person on goods belonging to another registered person”.
Who is a job worker and who is a principal?
The person who undertakes the job of treatment or process for another person is a job worker. The owner of the goods who engages the job worker is called Principal.
Whether the ownership of the goods get transferred?
The ownership of the goods remains with the principal.
Time limit for return of processed goods
According to Section 19 of CGST Act, Input goods should be brought back with one year and Capital goods should be brought back within three years.
Further, the provision of return of goods is not applicable in case of moulds and dies, jigs and fixtures or tools supplied by the principal to job worker.
What if goods are not received back within stipulated time?
If the goods are not sold or brought back within the stipulated time, the supply between the Principal and the worker is treated as “Deemed Supply” and tax is payable there on by the principal.
Job work procedural aspects
Principal can send input or 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 bring back such goods without payment of tax.
The principal is not required to reverse the ITC availed on inputs or capital goods dispatched to job worker.
Principal can send inputs or capital goods directly to the job worker without bringing them to his premises.
Still the principal can avail the credit of tax paid on such inputs or capital goods.
Options available to Job worker after processing of goods
A job worker has three options available after working on the principal goods.
- Send the goods to another job worker for further processing.
- Dispatch the goods to principal place of business without payment of tax.
- Remove the goods on payment of tax within India or without payment of tax for export outside India.
Can goods be sold directly from Job worker premises by the principal?
Principal can supply goods from the place of business of the job worker if the principal declares the place of business of the job worker as the additional place of business. If the job worker is registered under Section 25 than no need to declare additional place of business.
Transportation of goods in job work through Delivery Challan
Deliver Challan in prescribed format is required for transportation of goods from one place to another under GST in case of Job work.
What are the contents of Delivery Challan?
- Date of issuing challan and date of actual transportation
- Details about consignor and consignee like Name, address and GSTIN
- Description, HSN code and Quantity of Goods
- Basic value, tax rate and tax amount.
- Place of supply and signature.
The challan should always be serially numbered.
Input Credit on goods supplied to job worker
According to Section 19 of CGST act, 2017 provides that the person supplying taxable goods to the job worker shall be entitled to take input credit of tax paid on inputs sent to job worker.
Waste generated by Job worker
According to Section 143 (5) of the CGST Act, 2017, waste generated at the place of the job worker may be supplied directly by the registered job worker from his place of business on payment of tax otherwise such waste may be cleared by the principal, in case the job worker is not registered.