Simple concept of job work is that principal manufacturer would send inputs or capital goods, under intimation and without payment of tax to a job worker and if required, goods are further sent from one job worker to another job worker and after completion of job work, the goods are returned back to the principal manufacturer without payment of tax. In this article, we look at job work under GST, along with job work procedure and eligibility for claiming input tax credit.
Under the whole process, the principal manufacturer is not required to reverse the input tax credit availed on inputs or capital goods dispatched to job-worker. Hence, in simple terms job work means undertaking any process on inputs / semi-finished goods supplied by the principal manufacturer.
Definition of Job Work
Job work means any treatment or process undertaken by a person on goods belonging to another registered person. The ownership of the goods does not transfer to the job-worker but it rests with the principal manufacturer. The job worker is required to carry out the process specified by the principal manufacturer on the goods supplied by him.
As per section 143(2) of CGST Act, the responsibility for keeping proper accounts of inputs or capital goods sent for job work lies with principal manufacturer.
Job Work Procedure under GST
In order to send inputs or semi-finished goods, without payment of duty / without reversal of input tax credit to a job worker, the principal manufacturer has to prepare a ‘ Delivery Challan’ in the prescribed format. Challan should contain following details:
- Date and number of the delivery challan;
- Name, address and GSTIN of the consigner and consignee;
- HSN code, description and quantity of goods;
- Taxable value, tax rate, tax amount- CGST, SGST, IGST, UTGST separately;
- Place of supply and signature.
Details of the challans must be reflected in Form GSTR-1. Finally, details of challans must also be filed through Form GST ITC – 04. Form GST ITC – 04 must be submitted on quarterly basis by 25th day of the month succeeding the quarter. Under form GST ITC – 04, following details are to be provide:
- Goods dispatched to job-worker;
- Goods received from job-worker;
- Goods send from one job-worker to another job-worker.
E-way Bill for Job Work
As per GST provisions on e-way bill, e-way bill must be generated by every registered person who causes movement of goods of consignment value exceeding fifty thousand rupees even in cases where such movement is for reasons other than for supply. Hence even in case of movement of goods for job work, e-way bill must be generated. In case of interstate movement of goods, e-way bill would be generated either by the principal manufacturer or by the registered job worker irrespective of the value of the consignment.
Return of Goods to Principal
Return of goods to principal is a very important aspect under job work. Inputs and/or capital goods sent to a job worker are required to be returned to the principal within 1 year (in case of inputs) and 3 years (in case of capital goods) from the date of sending such goods to the job worker.
Provision of return of goods is not applicable in case of moulds and dies, jigs and fixtures or tools supplied by the principal manufacturer to job worker. However, when such moulds and dies, jigs and fixtures or tools are disposed off as scrap by the job worker, GST would be payable by the job worker (if job worker has GST registration), otherwise GST on sale of scrap would be payable by the principal manufacturer. When input and/or capital goods are not returned within the specified time, the same is required to be disclosed in Form GSTR-1 and the principal manufacturer is liable to pay the tax along with applicable interest.
Waste Generated by Job Worker
As per 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, in such case GST is payable by job-worker, however, if job-worker is not registered than such waste may be cleared by the principal manufacturer and GST would be payable by the principal manufacturer.
Input Tax Credit for Material Supplied to Job Worker
As per section 19 of CGST Act, 2017, the principal manufacturer can avail credit on input tax paid on inputs sent to job worker. The principal manufacturer can even avail credit on goods which are directly supplied to job worker.