Introduction
Job-work sector
constitutes a significant industry in Indian economy. It includes outsourced
activities that may or may not culminate into manufacture. The term Job-work
itself explains the meaning. It is processing of goods supplied by the
principal. The concept of job-work already exists in Central Excise, wherein a
principal manufacturer can send inputs or semi-finished goods to a job worker
for further processing. Many facilities, procedural concessions have been given
to the job workers as well as the principal supplier who sends goods for
job-work. The whole idea is to make the principal responsible for meeting compliance on behalf of the job-worker on the goods processed by him (job-worker),
considering the fact that typically the job-workers are small persons who are
unable to comply with the discrete provisions of the law.
The GST Act makes
special provisions with regard to removal of goods for job-work and receiving
back the goods after processing from the job-worker without the payment of GST.
The benefit of these provisions shall be available both to the principal and
the job-worker.
What is job-work?
Section 2(68) of the
CGST Act, 2017 defines job-work as ‘any treatment or process undertaken by a
person on goods belonging to another registered person’. The one who does the
said job would be termed as ‘job-worker’. The ownership of the goods does not
transfer to the job-worker but it rests with the principal. The job-worker is
required to carry out the process specified by the principal on the goods.
Job-work procedural aspects:
Certain facilities
with certain conditions are offered in relation to job-work, some of which are
as under:
A registered person
(Principal) can send inputs/ 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 and can still avail the credit of tax paid on such inputs or capital
goods.
However, inputs
and/or capital goods sent to a job-worker are required to be returned to the
principal within 1 year and 3 years, respectively, from the date of sending
such goods to the job-worker.
After processing of
goods, the job-worker may clear the goods to-
Another job-worker
for further processing
(ii) Dispatch the
goods to any of the place of business of the principal without payment of tax
Remove the goods on
payment of tax within India or without payment of tax for export outside India
on fulfilment of conditions.
The facility of
supply of goods by the principal to the third party directly from the premises
of the job-worker on payment of tax in India and likewise with or without
payment of tax for export may be availed by the principal on declaring premise
of the job-worker as his additional place of business in registration. In case
the job-worker is a registered person under GST, even declaring the premises of
the job-worker as additional place of business is not required.
Before supply of
goods to the job-worker, the principal would be required to intimate the
Jurisdictional Officer containing the details of the description of inputs
intended to be sent by the principal and the nature of processing to be carried
out by the job-worker. The said intimation shall also contain the details of
the other job-workers, if any.
The inputs or
capital goods shall be sent to the job-worker under the cover of a challan
issued by the principal. The challan shall be issued even for the inputs or
capital goods sent directly to the job-worker. The challan shall contain the
details specified in Rule 10 of the Invoice Rules.
The responsibility
for keeping proper accounts for the inputs or capital goods shall lie with the
principal.
Input Tax credit on goods supplied to job worker
Section 19 of the
CGST Act, 2017 provides that the principal (a person supplying taxable goods to
the job-worker) shall be entitled to take the credit of input tax paid on
inputs sent to the job-worker for the job-work. Further, the proviso also
provides that the principal can take the credit even when the goods have been
directly supplied to the job-worker without being brought into the premise of
the principal. The principal need not wait till the inputs are first brought to
his place of business.
Time Limits for the return of processed goods
As per section 19 of
the CGST Act, 2017, inputs and capital goods after processing shall be returned
back to principal within one year or three years respectively of their being
sent out. 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.
Extended meaning of input
As per the
explanation provided in Section 143 of the CGST Act, 2017, where certain
process is carried out on the input before removal of the same to the
job-worker, such product after carrying out the process is to be referred as
the intermediate product. Such intermediate product can also be removed without
the payment of tax. Therefore, both input and intermediate product can be
cleared without payment of duty to job-worker.
Waste clearing provisions
Pursuant to Section 143 (5) of the CGST
Act, 2017, waste generated at the premises of the job-worker may be supplied
directly by the registered job-worker from his place of business on payment of tax
or such waste may be cleared by the principal, in case the job-worker is not
registered.
Transitional provisions
Inputs, as such, or partially processed
inputs which are sent to a job-worker prior to introduction of GST under the
provisions of existing law [Central Excise] and if such goods are returned
within 6 months from the appointed day
i.e. the day on which GST will be
implemented] no tax would be payable. If such goods are not returned within
prescribed time, the input tax credit availed on such goods will be liable to
be recovered. If the manufactured goods are removed, prior to the appointed
day, without payment of duty for testing or any other process which does not
amount to manufacture, and such goods are returned within 6 months from the appointed
day, then no tax will be payable. For the purpose of these provisions during
the transitional period, the manufacturer and the job-worker are required to
declare the details of such goods sent/received for job-work in prescribed format
GST TRAN-1, within 90 days of the introduction of GST.
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