The introduction of the GST system in India has revolutionised how businesses handle taxes. An important part of this system is the Harmonised System of Nomenclature (HSN) code. This code offers a uniform way to classify goods and services. In this article, we’ll delve into the HSN code for job work, its importance in the GST system, and how businesses can pinpoint the right HSN code for their job work services.
What is Job Work?
Job work is like outsourcing certain tasks to other businesses or individuals. These tasks can be things like making, processing, putting together, or packing goods. For example, a company might hire someone else to put their products together, and that person or business then brings the finished products back to the company.
This is a big deal in India, especially for smaller and medium-sized companies. They send parts of their production process to other businesses, known as job workers, who are experts at those tasks. This helps smaller companies cut down on costs, work more efficiently, and focus on what they’re really good at. And it’s a win-win because job workers get to use their skills and equipment, which creates jobs and helps the economy grow.
So, job work is pretty important in India. It brings businesses together, encourages innovation, and helps the country move forward.
HSN Code for Job Work
The HSN code for job work services in India is 9988. This code is used for services related to job work, like manufacturing services for materials owned by someone else, processing or making things from materials owned by others and providing printing and reproduction services on a contract basis.
In the GST system, job work services are taxed based on the rate that applies to the goods being worked on. For example, if a job worker is making products from materials owned by a main manufacturer, the GST rate will be determined by the HSN code rate for those finished products.
Having the right HSN code for services in India is really important to follow the GST rules. You need to figure out the correct HSN code for each job work service to make sure the taxes are calculated correctly and to avoid any penalties. Different industries, like textiles, jewellery, and leather, have their specific HSN codes. Understanding how the HSN code works for job work services and following the right steps helps companies follow the GST rules, cut costs, and support the country’s economic growth.
HSN Code for Job Work Services in Specific Industries
While the general HSN code for job work services is 9988, certain industries have their own specific HSN codes for the services they provide. Let’s look at some examples:
Textile Industry – HSN Code 9987: This code is reserved for services connected to textiles. It covers tasks like weaving, knitting, sewing, embroidery, and similar activities in the textile sector.
Jewellery Industry – HSN Code 9987: In the world of jewellery, the HSN code is 9987. It’s applied to services related to jewellery making, including cutting, polishing, setting, and finishing.
Printing Industry – HSN Code 9989: When it comes to the printing industry, you’ll find their services under HSN Code 9989. This code is for services like printing newspapers, books, journals, and other printed materials.
So, different industries have their own unique HSN codes to classify their services accurately. It helps make sure that each sector is following the right rules and tax rates under the GST system.
Determining the Correct HSN Code for Job Work Services
Finding the right HSN code for services can be a bit tricky for businesses. Here’s a step-by-step guide to help you out:
- Identify the Nature of the Job Work Service: First, figure out what kind of job work service you’re providing. Is it manufacturing, processing, or printing? Knowing the primary nature of the service is key.
- Identify the Industry: Next, determine the industry where you’re offering this service. Is it textiles, jewellery, printing, or something else? This helps narrow down the options.
- Check the HSN Code Book: The HSN code book is your go-to resource. It has a complete list of all the HSN codes and what they stand for. Use this book to match up the nature of your service and the industry you’re in with the right HSN code.
- Consult a Legal Expert: If you’re still unsure and things seem a bit tangled, don’t hesitate to reach out to a legal expert or a tax consultant. They can provide you with the guidance and assistance you need to make sure you’re on the right track.
By following these steps, you can make sure you’re using the correct HSN code for your services and stay in compliance with the rules.
How can goods be sent for job work under GST?
If you’re registered under GST, you can send stuff like raw materials, equipment, or partially finished items to a job worker to get some work done. When you want these things back, you might have to pay GST on them, or in some cases, you might not need to pay any GST at all. It all depends on the situation.
Time limit clause to bring back processed goods under job work
Now, let’s talk about a critical part of GST – getting your goods back once the job work is done. If you’re the one who sent the stuff for job work, you have a couple of options. You can bring the goods back to your place after the job work is completed. Or, if you prefer, you can send them directly from the job worker’s place to your end customer, including for export.
There are some time limits to keep in mind. For things like raw materials, you need to either supply them to someone else or bring them back from the job worker within one year. But if we’re talking about capital goods, except for stuff like moulds, dies, jigs, and fixtures or tools, you’ve got up to three years to get them back from the job worker’s place. So, time is of the essence when it comes to managing your goods under GST.
What Is GST Rate on Job Work Charges?
The GST rate for job work services went through some changes during a GST council meeting on September 20, 2019. Here are the details of the updated GST rates for job work services:
- For job work services related to diamonds, the GST rate was lowered from 5% to 1.5%.
- There was a reduction in the GST rate from 18% to 12% for mechanical job work services, particularly in the engineering industry. However, it’s essential to note that job work related to bus body construction still carries an 18% GST rate.
- The GST rate depends on whether the job worker and the principal manufacturer are registered or not. If both are registered, the GST rate is 12%. If the job worker is registered, but the principal manufacturer is not, the rate is 18%. If neither the job worker nor the principal manufacturer is registered, there’s no applicable rate (NA).
These changes in GST rates aim to simplify and streamline the tax system, making it easier for businesses to understand and comply with the rules.
What Is the Procedure under GST?
When you send goods for job work, it’s crucial to include a challan as a record of what’s being sent.
You need to get those goods back within certain time limits:
- For things like raw materials, partially finished, or fully finished goods, you’ve got one year.
- For more significant items, like capital goods, you have up to 3 years.
If you don’t get your goods back within those timeframes, they might end up being considered supplied to the job worker by the person who sent them.
Now, if you’ve got waste and scrap from all the work, there are a couple of ways to handle the taxes:
- If the job worker is registered, the taxes can be managed by them.
- But if the job worker doesn’t have a registration, the principal, the person who sent the goods, takes care of the tax payment.
These rules help keep things in order when you’re dealing with goods and job work.
What Is GST Registration Requirement for Job Workers?
A job worker needs to get a GST registration, but only if their total sales in a financial year go over a certain limit. It doesn’t matter if the person they’re working for (the principal) lives in the same state or a different one.
Now, when it comes to people working with jewellery, gold, silverware, and similar stuff, they must get registered even if they’re providing services across different states. So, it’s a bit different for them.
What Is Tax Liability of Job Work?
No tax is due if you take the goods away either six months before the effective date or within six months after the effective date.
But if it’s after six months, you’ll need to pay the tax. There’s a bit of room, though, as you can extend this period for up to two more months.
What is ITC provision on inputs and Capital Goods for Job Work?
When a principal sends inputs and capital goods to a job worker for some work, they can get a credit for the taxes they paid on those items.
Here’s the neat part: they can claim this credit even if the goods go directly to the job worker without landing at the principal’s place first. In other words, they don’t have to wait for the goods to show up at their own place before getting those tax benefits.
What Is the Difference between a Work Contract and Job Work?
Works Contract in GST
In GST, a works contract is when the transfer of title to goods is part of a contract. This contract can cover various things, like construction, manufacturing, completion, installation, improvement, alteration, repair, maintenance, or refurbishment of any immovable property. The key is that it involves both goods and services.
The goods don’t have to stay in the same form; they can be transformed in various ways. But as long as there’s a contract involved, it falls under the category of a GST works contract.
A job work is when one person works on goods that belong to another registered taxpayer. When goods are supplied from a registered taxable owner (the Principal) to job workers, they aren’t subject to GST (according to Section 43A). Goods can also be passed from one worker to another in this process. But remember, Section 43A doesn’t apply to exempted or non-taxable goods or when dealing with unregistered persons.
Here’s the bonus: you can claim an Input Tax Credit (ITC) if the goods (non-capital goods) are returned within one year after the job work is done. For capital goods sent in job work, you’ve got three years from the date they were shipped. If the inputs were sent directly, the clock starts ticking from the date the job worker received those inputs.
How to Create GST Invoice for Job Work?
GST Invoice Requirements
When a primary manufacturer wants to send inputs or semi-finished goods to a job worker without paying duty or reversing the input tax credit, they need to create a ‘Delivery Challan’ in the required format.
This challan should contain the following information:
- Date and delivery challan number
- Name, address, and GSTIN of both the sender and recipient
- HSN code, product details, and quantities
- Separate details for CGST, SGST, IGST, and UTGST, along with the taxable value, tax rate, and tax amount
- Place of supply and a signature
This information from the challan needs to be included in Form GSTR-1. Additionally, Form GST ITC – 04 is used to provide challan details.
You’ll need to submit Form GST ITC – 04 quarterly, and it should be sent by the 25th day of the month following the quarter. This helps keep everything in order when dealing with GST and job work.
In India’s GST system, the HSN code for job work services is a big deal. It’s like a universal language for classifying these services and ensuring the right taxes are applied. To play by the rules and steer clear of fines, businesses need to figure out the right HSN code for their services.
The steps we’ve talked about in this article help businesses do just that. By following these steps, they can make sure they’re using the right HSN code for their services, keeping everything in line with the GST rules. It’s all about getting it right and staying on the right side of the law.