What is job work?

Section 2(68) of CGST Act ,2017 defines job work. It means any treatment or process undertaken by a person on goods belonging to another registered person. Process is specified by the principal (owner of the goods who must be registered).

A person carrying on the job work activity is termed as a job worker (registered or unregistered depends on his turnover).

Example-

1. Goldsmith (karigar) is the example of job worker when he is outsourced the work to be performed on biscuit of gold to make the jewellery.
2. A cloth merchant may send goods to job worker for embroidery on clothes.

What is Job work procedure under GST?

GST law provides for special provisions regarding removal of goods for job work and receiving back the goods after processing. Section 143 of the CGST Act makes provisions for special procedures. The whole idea is based on a concept that primary responsibility of compliances should be of principal as job worker is a small person.

The procedure for job work under GST involves following several steps-

Steps To Be Taken By Principal

• Before supply of goods to job worker principal would be required to intimate the jurisdictional officer containing the details of goods sent for job work and nature of processing to be carried out by the job worker.
• Principal must prepare a delivery challan while sending goods (input/capital goods) to job worker. Challan must contain details such as description,quantity,value,GSTIN of supplier and job worker.
• Principal can send goods to job worker without payment of tax, and he is not required to reverse the ITC availed on inputs or capital goods sent to job worker.
• Principal can send inputs or capital goods from his premises or directly from the supplier’s place to job worker without bringing them to his premises. In both cases he can avail the benefit of ITC of tax paid at the time of purchase from supplier.
• The responsibility for keeping proper accounts for the inputs or capital goods shall also lie with the principal.

Steps To Be Taken By Job Worker

After processing of goods-

• The job worker may clear the goods to another job worker for further processing
• or send goods to principal’s place of business without payment of tax
• Remove the goods directly from his place on behalf of principal to third party on payment of tax within India or Without payment of tax for export outside India on fulfilment of specified conditions*. (*condition is that if job worker is unregistered then principal must declare the job worker’s premises as additional place of business but if job worker is registered then this declaration is not required.)

Input tax credit on goods supplied to job worker

Section 19 of CGST Act ,2017 provides that principal supplying taxable goods shall be entitled to take credit of input tax paid at the time of purchasing the goods which are sent to job worker. Section 19(2) and 19(5) provides that principal is entitled to take ITC even when the goods have been directly supplied to job worker without bringing into the premises of the principal.

In simple words the principal need not wait till inputs are first brought to his place of business for availing ITC.

Time limits for return of processed goods

After processing goods must be sent to the principal within a certain time period otherwise it will be treated as supply on the day when the said inputs were sent out sand the tax will be applicable on such deemed supply.

• Inputs after processing shall be returned to principal within one year
• Capital goods shall be returned to principal within three years

Note - 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.

Treatment of Waste and Scrap

Waste and scrap generated during job work can be supplied as under-

• If job worker is registered, then it can be supplied by the job worker directly from his place of business on payment of appropriate tax on the said waste and scrap.
• If he is unregistered, then the waste generated should be returned to the principal along with the goods and such waste would be supplied by the principal on payment of tax. Alternatively, the principal may supply waste or scrap directly from the premises of job worker under his invoice on payment of tax.

Documents

Challan -

• All goods sent for job work must be accompanied by a challan.
• It will be issued even for goods sent directly to the job worker.
• The details of the challans must be shown in FORM GSTR-1.
• Details of challans must also be filed through Form GST ITC –04*.

(*ITC-04 was a quarterly form until September 2021. It had to be furnished on or before the 25th day of the month succeeding the quarter. For example, for the Jul-Sept quarter, the due date is 25th October 2021.

However, with effect from 1st October 2021, it is a half-yearly and yearly form as follows:

1. Those with an annual aggregate turnover of more than Rs.5 crore – Half-yearly from April-September- due on 25th October and October-March due on 25th April.
2. Those with an annual aggregate turnover of up to Rs.5 crore – Yearly from FY 2021-22 due on 25th April.)

E-Way Bill

For every inter-state supply of goods to job worker, generation of e - way bill is mandatory even if value of consignment is less than 50000 Rupees.

GST Rate on Job Work

CGST rates for job work which falls under HSN 9988.

The GST council reduced the GST rate on the engineering job work from 18% to now12 % while the diamond supply job work is now under the 1.5 % GST rate from 5%.

Also, in the latest GST circular 126/45/2019, it has been clarified that all the registered taxpayers under job work are to be levied with 12% GST and hence the unregistered taxpayers under the GST job work will have to give 18% GST Rate.

Latest update in relation to rates

• 47th GST meet- Rate 12% to 18%

“Works contract for roads,bridges,railways,metro,effuent treatment plant, crematorium etc.” Works contract supplied to central and state governments, local authorities for historical monuments, canals, dams, pipelines, plants, plants for water supply, educational institutions' hospitals etc. & subcontractor thereof.

• 47th GST meet- Rate from 5% to 12%

“Job work in relation to the manufacture of clay bricks.” Works contract supplied to central and state governments, union territories & local authorities involving predominantly earthwork and subcontracts thereof.

• 52nd GST meet - As applicable to food and food products, job work services for processing barely into malt attract GST @ 5%.

Place of supply

So far as job work is concerned, supply for job work is governed by section 12 (2) of IGST Act,2017.

Where the registered job worker and the principal are in different states and goods are removed directly from the place of job worker -

• If the principal (supplier of goods) and recipient (buyer of the goods) are in the same state, then SGST and CGST shall be levied, though the job worker is in a different state.
• If the principal and recipient are in different states, then IGST shall be levied, even though the recipient is in the state where the job worker is situated.

So, from the above provisions, it is clear that job work is a crucial part of understanding in GST regime.

Related Sections/Rules/Circulars related to GST