The job work sector is one of the major sectors in the Indian Economy. Here, a principal manufacturer provides the inputs or semi-finished goods to the job worker, who then further processes the goods and returns them to the principal. Job workers are considered to be small businesses that may not be able to comply with GST provisions and payment requirements. The primary objective of the job work concept under GST is to fulfill the compliance requirements of the principal on behalf of the job worker regarding the goods processed.
Under the GST Laws or the Act, there are specific special or particular provisions available with regard to the removal of the goods for job work and receiving back the goods after processing from the job worker without payment of the GST, which will be made available not just to the job worker but also the principal.
Job Work
As per the GST Act, job work is defined as the treatment or process that a person performs on goods while these goods belong to another registered person. The person responsible for further processing or treatment of goods belonging to the registered person or the principal is referred to as the job worker. The ownership of the goods will not be transferred to the job worker for further processing or treatment. The ownership, therefore, rests with the manufacturer or the principal, and the job worker is only required to carry out the process that the principal specifies.
Procedural Aspects of Job Work
The GST Act provides certain facilities with certain conditions in relation to job work, and some of the same have been discussed below:
- The principal who assigns the work to the job worker and the registered person can send inputs or capital goods under intimation, subject to certain conditions, without any tax payment to the job worker. These goods, then, after the completion of the work, would be brought back without payment of tax. When such goods are passed on to the job worker by the principal, then such principal need not reverse the ITC (Input Tax Credit) availed on inputs or capital goods.
- The principal can send inputs or capital goods to the place of the job worker for further processing without bringing them to their premises, and also claim input tax credit (ITC) for the taxes paid on such inputs or capital goods.
- The job worker should return such input goods or capital goods sent to him within a period of 1 to 3 years, respectively, from the date on which such goods were sent to the job worker.
- After the processing or treatment of the goods, the job worker may clear the goods to,
– Another job worker for further processing,
– Send or forward the goods to another place of business of the principal without payment of any tax as may be requested by the principal,
– Remove the goods upon payment of tax within India or without payment of tax for the export of goods outside India, upon fulfillment of the conditions.
There shall also be a facility for the principal to supply goods directly to the third party. This shall be directly from the premises of the job worker. This can be done on payment of tax in India or with or without payment of tax for export. To avail of this, a principal can also declare the premises of the job worker as their additional place of business under their GST registration. And suppose the job worker is a registered person under the GST Act. In that case, the principal need not declare the premises of the job worker as an additional place of business, as this is mostly completely distinct from the principal’s business.
Prior to the supply of goods to the job worker, the principal should intimate the Jurisdictional Officer, the details of such inputs or capital goods along with proper descriptions which are intended to be sent to the job worker along with more information regarding the process which is to be done by the job worker on the same. Such information or intimation should also contain the details of another or additional job worker, if any.
And these goods, i.e., inputs or capital goods, sent to the job work should be covered by a challan, which the principal issues. In case of inputs or capital goods that are sent directly to the job worker, a challan should be issued, and this challan shall contain all the details as specified under Rule 100f of the Invoice Rules. However, it should be noted that all responsibility pertaining to the maintenance of proper accounts for the inputs or capital goods shall lie with the principal.
ITC on Goods Supplied to Job Worker
Under the GST Act, the principal shall be entitled to avail of the ITC of the taxes paid on the input goods and capital goods that are sent to the job worker. Even if input or capital goods are directly sent to the job worker or the final consumer without being brought to the principal’s premises, ITC can also be availed. Still, the principal need not wait until the same is brought into their premise for availing the ITC.
Extended meaning of Input
Before removing inputs and capital goods to the premises of the job worker, if any process is carried out, the product after processing shall be referred to as an intermediate product. This can be removed from the premise of the principal without payment of tax. Hence, we can say that both intermediate and input products can be cleared without the payment of duty to the job worker.
Time Limit for Returning the Processed Goods
Section 19 of the GST Act provides that inputs and capital goods which are sent to the job workers’ premises by the principal or manufacturer should be returned after completion of the processing or further treatment for which the same was given, or within 1 or 3 years, respectively, of them being sent out. With respect to moulds and dies, jigs and fixtures, or tools supplied by the principal to the job worker, this provision shall not apply and need not be complied with.
Waste Clearing Provisions
Any waste that is generated at the premises of the job worker may be supplied directly by the registered job worker from his place of business upon payment of tax, or such waste may be cleared by the principal in case the job worker is not registered.
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