Job Work under GST

Job Work under GST - Procedural aspect

 

In India's economy, the job-work sector is a large business. It covers outsourced tasks that could or might not lead to manufacturing. The definition of "job-work" is provided by the phrase itself. It involves processing the principal's products. The idea of "job-work" already exists in Central Excise, where a major manufacturer might transfer inputs or semi-finished items to a job worker for additional processing. Both the job employees and the primary supplier that provides items for job work have received several facilities and procedural concessions. The main point is to hold the principle liable for upholding compliances on behalf of the job-worker for items handled by him (the job-worker), given that most job-workers are often tiny individuals who are unable to uphold specific legal requirements.

 

Read more –  Aggregate Turnover Under GST 

Regarding the removal of goods for job-work and getting the goods back from the job-worker after processing, the GST Act establishes particular rules that must be followed. The principal and the job-worker both have access to the benefits of these laws.

 

What is Job-work?

 

Job-work is defined as "any treatment or process undertaken by a person on goods belonging to another registered person" under Section 2(68) of the CGST Act, 2017. The person performing the given task is known as a "job-worker." The products remain the principal's property; ownership does not pass to the job worker. The job-worker must perform the process that the principal has defined on the items.

Job-work Procedural aspects:

 

Job work under GST refers to a process in which a registered person (the principal) sends taxable goods to another registered person (the job worker) for processing, repair, or any other kinds of work. The goods are returned to the principal after the completion of the job work. The following are some important points to note:

 

-          Registration: Both the principal and job worker must be registered under GST.

-          Challan: The principal must issue a challan to the job worker containing the details of goods sent for job work.

-          Input Tax Credit: The principal can claim input tax credit (ITC) on the goods sent for job work, subject to certain conditions.

-          Time Limit: The job worker must return the goods within a specific time limit, which can be extended on payment of tax.

-          Tax Liability: The job worker is liable to pay tax if the goods are not returned within the time limit or are supplied without processing.

-          Procedure: The job worker can undertake job work either at his own premises or at any other place specified by the principal. The job worker is required to maintain proper records of the goods received and processed.

Regarding job-work, certain facilities are provided under specific terms, some of which are as follows:

(a)  A registered person (Principal) may notify a job-worker, deliver inputs or capital goods to that job-worker and from there to another job-worker without paying tax, and then return those products when the job-work is finished without paying tax. The principal is not required to reverse the ITC availed on inputs or capital goods sent to job-worker.

 

(b)  Principal can send inputs or capital goods directly to the job-worker without bringing them to his premises, still the principal can avail the ITC of tax paid on such inputs or capital goods.

 

(c)   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 [the period of one year and three years may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.]

 

(d)  After processing of goods, the job-worker may clear the goods to-

 

 

·       another job-worker for further processing;

·       send 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 specified conditions.

When declaring the job-worker's premises as his additional place of business during registration, the principal can use the option of directly supplying goods to a third party from the job-worker's premises on payment of tax in India as well as with or without payment of tax for export. If the job-worker is a registered GST user, there is no need to declare their location as an additional place of business.

 

Prior to supplying the products to the job-worker, the principal must provide the jurisdictional officer with information on the description of the inputs they want to send and the type of processing the job-worker will be performing. Details of any additional job workers must also be included in the aforementioned intimation.

 

Under the cover of a challan issued by the principle, the inputs or capital items must be given to the job-worker. Even if the inputs or capital items are being delivered directly to the job-worker, a challan must still be issued. The Challan shall contain the details specified in Rule 55(1) of the CGST Rules, 2017.

 

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:

 

According to Section 19 of the CGST Act of 2017, the principle (a person supplying taxable goods to the job-worker) is allowed to claim the credit for the input tax that was paid on the supplies that were provided to them for the job. The proviso also stipulates that the principle may claim the credit even if the products were delivered to the job-worker directly rather than being brought onto the principal's property. In order to get ITC, the principle does not have to wait till the inputs are delivered to his place of business.

 

Time Limits for return of processed goods:

 

Inputs and capital items must be returned to the principal within a year or three years, respectively, of being sent out, according to Section 19 of the CGST Act, 2017. Additionally, the provision of a return of goods does not apply to tools, jigs, and fixtures, or moulds and dies that the principal supplied to a job-worker.

 

Extended meaning of input:

 

According to the explanation in Section 143 of the CGST Act, 2017, when a certain process is performed on the inputs before removing them to the job-worker, such product after performing the process to be referred to as the intermediate product. The removal of such an intermediary product is likewise possible without paying tax. As a result, both inputs and intermediate products may be cleared without payment of tax to the job worker.