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Job Work under GST

Meaning of Job Work:

The definition of job work has been defined in section 2(68) of CGST Act, 2017.

"Job work means any treatment or process undertaken by a person on goods belonging to another registered person."

In Job work, “Principal” should be a registered person thus, treatment or process undertaken by job worker for an unregistered person will not be considered as Job work.

It is worth noting that, Job worker may or may not be registered person under GST (Job worker can avail the benefit of threshold limit ie. 40 lakh for registration under GST wef 1st April 2019)

Job work may include the following activities:

a> Testing of goods 
b> Packing & re-packing 
c> Inspection & processing 
d> Any other treatment or process required for goods.

Nature of Supply – As per Schedule II, any treatment or process which is applied to another person's goods is a supply of services. Hence, for determining the value of job work charges as per section 22 of CGST Act, 2017, the value of goods sent by the principal shall not be included.

The procedure of sending goods to job worker:

The principal is required to intimate the details of challans in respect of goods sent to a job worker or goods returned from job worker to the GST officer in Form ITC -04 by the 25th of the month following the quarter under section 143 of the CGST Act, 2017.

The principal can send any inputs or capital goods to a job worker without payment of tax, the condition being that the goods shall be received back within 1 year (Inputs) and 3 years ( capital goods) of their being sent out. If the goods are not returned within the time prescribed, then the same shall be treated as supply and principal will have to pay tax along with interest.

The principal shall prepare delivery challan in triplicate in terms of rule 45 and 55 of CGST rules. 

Two copies of challan can be sent to job worker along with goods and after carrying out the job work, at the time of returning of goods to the principal, job worker shall return one copy of challan to the principal.

Circumstances under which goods can be moved:

a> Principal to job worker – Principal can send goods to job worker either from his own premises or he can also send goods directly to the place of job worker without receiving the said goods in his premises first. Input tax credit can also be availed in such cases even though, the principal has not received goods.

b> One Job worker to another job worker- One job worker may further move the goods to another job worker for further processing or treatment on goods sent by the principal. In this case, goods may be moved under the cover of a challan issued by principal or job worker Or job worker may endorse challan issued by the principal.


Return of goods from job worker – 

The goods sent by the principal to a job worker shall return within 1 year in case of inputs and within 3 years in case of capital goods. If the goods sent for job work are not received back within the prescribed time mentioned above, then the same goods shall be treated as Supply from the date the said goods were sent out. The principal of the good shall have to declare this supply in his Form GSTR-1 and he will also be liable to pay tax on said supply along with applicable interest. 

However, above time limit of 1 year/ 3 year will not be applicable to molds, dies, jigs and fixtures or tools.

Can principal claim Input tax credit for goods sent to job worker?

The principal is allowed to take the input tax credit on inputs/capital goods sent to a job worker as per section 19(1) of CGST Act, 2017.
The input tax credit can be claimed even if goods are not received first by the principal and are directly sent to the job worker

E-Way bill requirement for goods sent to job worker

As per the third proviso to rule 138 (1) of the CGST Rules , E-way bill is compulsory in case of job work. It can either be generated by principal or by registered job worker irrespective of value of goods.
The threshold limit of Rs. 50,000 Interstate or Rs. 1,00,000 intrastate for generation of e-way bills is not available in this case.

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