The definition of job-work already exists in Central Excise and the job worker plays a major part in the Indian economy due to involvement in the processing of input or unfinished goods. GST makes the Principal (the owner of the goods) take care of compliance on behalf of the job worker. While considering the fact that job work is often an MSME sector and the same is not able to comply with the structure of the tax.
Latest Update
- 52nd GST Meet – As applicable to food and food products, job work services for processing barley into malt attract GST @ 5% (not 18%).
- 47th GST Meet – GST Rate from 5% to 12%
- “Job work in relation to the manufacture of clay bricks”
- “Works contract supplied to central and state governments, union territories & local authorities involving predominantly earthwork and sub-contracts thereof”
- 47th GST Meet – GST Rate from 12% to 18%
- “Works contract for roads, bridges, railways, metro, effluent treatment plant, crematorium etc”
- “Works contract supplied to central and state governments, local authorities for historical monuments, canals, dams, pipelines, plants for water supply, educational institutions, hospitals etc. & subcontractor thereof”
- Odisha GST AAR has issued the order related to the construction of the Hydrogen and Nitrogen Gas Plant. The agreement said the raw materials which are for making industrial gas by IOCL are not qualified as Job Work. Read PDF
What is Job-work Under GST?
The definition of Job-work under GST is covered under section 2(68) of the CGST Act, 2017 states “Any treatment or process undertaken by a person on goods belonging to another registered person”. Therefore, a job worker is a person (registered or unregistered) who is processing or treating the goods of another registered person and the owner of the goods is called the Principal in this respect.
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Section 19 of the CGST Act, 2017 explains the definition of the Principal as ‘a person supplying goods to the job-worker.’
The Responsibilities Lie With The Principal
- The Principal issues the challan (as specified in rule 10 of invoices rules under GST) to the job worker for the inputs or capital goods
- Maintaining the accounts of input and capital goods
- Intimate the jurisdictional officer for the detailing of the intended input goods and the nature of the processing being delivered by the job worker
Time Constraint for Returning the Processed Goods to the Owner
The supply of the inputs to the job work shall be returned to the Principal within a year, the date is counted from the date of receipt. In the case of processing capital goods, the time limit for returning the processed goods within the premises of the owner is three years.
Section 19 of the CGST Act, 2017, except for the supply of capital goods or inputs, all the tools, fixtures, jigs, moulds, and dies supplied by the Principal to the job worker are not covered under the returning norms.
GST Rate on Job Work
The GST council further reduced the GST rate on the engineering job work from 18% to 12% while the diamond supply job work is now under the 1.5% GST rate from 5%.
Also in the latest GST circular 126/45/2019, it has been clarified that all the registered taxpayers under job work are to be levied with 12% GST and hence the unregistered taxpayers under the GST job work will have to give 18% GST rate.
Credit On Input Tax Paid On Goods Supplied To Job-worker
Under the CGST Act, the Principal supplies capital goods or inputs to the job worker for processing and is responsible for paying the input tax on such goods. So, the Principal is meant to take the credit for input tax paid on such goods.
The law compensates the owner for applying for the credit without waiting till the inputs come to the premises if the goods are sent directly to the job worker without taking it to the premises of the business.
Procedure to Claim Input Tax Credit on Job Work
A. Purchased Goods can be sent to the job worker in the given manner:
- From Principal Place of Business
- Directly From the place of supply of the supplier of such goods
In both above cases, ITC will be allowed.
B. Effective dates of Goods sent out depending on the place of business:
- Either Good sent out from the principal place of business or
- Goods are sent out directly from the place of supply of the supplier. In such case date of the recipient of the job-worker is required.
C. The goods sent out should be received back by the principal manufacturer within the particular period:
- Capital Goods- 3 years
- Input Goods- 1 year
Effective dates of being goods sent out or acquired by the job worker, totally depend on the place of business from where goods are sent out Consider points – A & B
D. If case capital and input goods are not received within 3 years and 1 year respectively. These goods will be considered as supply from the dates and the tax will be applicable on such deemed supply and the challan issues will be considered as the invoice for such supply.
Rules and Restrictions to Claim Input Tax Credit under Job Work
A. Inputs, semi-finished goods or capital sent out on job work
- Goods sent out from the principal place of business
- Goods sent out directly from the place of supply of the supplier
It is necessary to send out goods along with a challan
B. The Challan should include the particular points
- Date and number of the delivery challan
- Name, address, and GSTIN of the consignor 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
C. The information details of the challan should be shown in GSTR- 1 Form
D. Information details of input/ capital goods sent out to the job worker must be claimed through GST ITC – 4
Transitional Provisions for Job-work Under CGST
Transitional provisions are meant to decide whether the goods and services being processed or under-processed before or on the appointed day of GST are liable to be covered under GST or not. The cases which exempt the Principal from paying the tax:
- Under the Central Excise law, inputs or partially worked inputs are sent to job-worker for processing before the introduction of GST and the goods returned to the premises of the Principal within 6 months from the appointed day of GST, then no tax is applicable on such goods
- If the goods are not returned before 31st December, it is liable to be covered by the input tax credit.
- In case, the Principal has supplied the goods or inputs to the job worker and the goods are removed within 6 months from the 1st of July, all such supplies are need not pay tax but required to furnish the GST TRAN-1 form within 90 days of implementation of GST
FAQs Related to Job Work Mechanism & its Compliance Under GST
Q.1 – Define Job Work?
The job Work industry deals in the processing of the raw materials/semi-furnished or intermediate goods to convert them into final or consumable products. The raw materials are provided to the sector by principal manufacturers.
Q.2 – How is a Job Work unit defined under GST provisions?
As per the clauses of Section 2(68) of the Central GST Act, Job Work is the processing/treatment for the final transformation of the goods belonging to the other registered person. The person who performs the task is called ‘Job Worker’. However, the ownership of the goods remains with the concerned person (principal manufacturer) and the job worker is obliged to work as per the requirements of the principal manufacturer.
Q.3 – Who are Principal Manufacturers?
Principal manufacturer is the actual owner of the raw materials/semi-furnished goods who outsources the task of transforming the goods to Job Work Sector. Job Worker converts the raw material into finished goods and is paid for his services.
Q.4 – What are the terms of registration for Principal Manufacturers and Job Workers?
Registration under GST is the must for Principal manufacturer as well as Job Workers. However, the registration relies on various registration criteria mentioned u/s 22 & 23 of the Central GST Act. Registration under GST is beneficial for the Job Work Sector as it has customized provisions for the sector when it comes to simplified return filing, ITC claim or GST rate applicability.
Q.5 – What are the applied GST rates for the Job Work Industry?
| Principal Manufacturer | Job worker | GST Rate |
|---|---|---|
| Registered | Registered | Rates specified in chapter heading 9988 for the respective goods/services |
| Registered | Unregistered | N/A |
| Unregistered | Registered | 18% * |
Q.6 – What category of goods are processed in the job work sector?
The goods processed for final consumption by the Job Work Sector are either the input goods or Capital Goods delivered by principal manufacturers.
Q.7 – Are there any policies (under GST) for sending the raw materials to the Job Work Sector?
The goods delivered by the Principal Manufacturer to Job Work Sector for processing needs to be processed and the furnished products need to be re-delivered to the Principal Manufacturer within the prescribed deadlines set by GST Governance. The time limit is as follows:
- For Input Goods – Within 1 Year
- For Capital Goods – Within 3 Years
- No terms of return are mentioned for Moulds, dies, Jigs and fixture or tools
Q.8 – Are there any documents or intimation involved while sending the raw materials for final-furnishing to the Job Sector?
The delivery of the raw material to the Job Work Sector is authenticated by a challan issued by the principal manufacturer. The format of the challan is prescribed by rule 10 of Invoice Rules. The complete list of items delivered by the principal manufacturer to the Job Worker needs an entry in Form ITC-4. The form is filed by the principal manufacturer mentioning the details of the items sent to the job worker. ITC-4 is quarterly compliance mandatory for every principal manufacturer. deadline s for furnishing the Form ITC-4 is on or before 25 of the Month succeeding the quarter. ITC-4 is an online compliance form.
Q.9 – What are the contents of Form ITC-4?
Form ITC 4 is the requirement by Principal Manufacturer and te format includes information such as;
- List of Goods delivered to Job Workers or received from them
- The goods sent from one Job Worker to another due to finishing requirements
- Goods received back from the Job Worker
- Details of the job worker to whom the goods are transferred from the prior job worker
Q.10 – Is there any Input Tax availment on the goods sent to Job Workers?
Yes, Input Tax can be availed by the Principal Manufacturer on input goods/capital goods sent to Job Workers. Principal manufacturer can avail input tax even when the goods are directly transported to the job worker’s site without reaching his premises. Provided that the manufacturer must contain the document of supply.
Q.11 – How it is mentioned that the furnished goods are been re-delivered to the Principal Manufacturer?
Yes, Input Tax can be availed by the Principal Manufacturer on input goods/capital goods sent to Job Workers. Principal manufacturer can avail input tax even when the goods are directly transported to the job worker’s site without reaching his premises. Provided that the manufacturer must contain the document of supply.
| To | Payment of Tax | Conditions ( if any) |
|---|---|---|
| Principal | Not required | No conditions |
| Another Job worker | Not required | No conditions |
| Buyer ( for sale) | Required (For clearing within India) Not Required ( For Exports) | Job worker premises require to be registered as both Principal`s additional place of business or Job worker own registration |
Q.12 – Are there any documents or intimation involved while sending the raw materials for final-furnishing to the Job Sector?
The waste/scrape generated during goods processing can be disposed of by either the principal manufacturer or the job worker once the taxes u/s 143 of the CGST Act are paid.
Q.13 – Are there any documents or intimation involved while sending the raw materials for final-furnishing to the Job Sector?
| Goods/Inputs from place | Goods/Inputs to place | Movement type | Eway bill generation limit | Eway bill primary responsibility |
|---|---|---|---|---|
| Principal | Job worker | Intra state | Rs.50000 | Principal |
| Principal | Job worker | Inter state | Limit N/A | Principal |
| Job worker – Registered | Principal | Intra state | Rs.50000 | Job worker |
| Job worker – Registered | Principal | Inter state | Limit N/A | Job worker |
| Job worker – Unregistered | Principal | Intra state | Rs.50000 | Principal |
| Job worker – Unregistered | Principal | Inter state | Limit N/A | Principal |
| Job worker – Registered | Customer- For Sale | Intra state | Rs.50000 | Job worker |
| Job worker – Registered | Customer- For Sale | Inter state | Limit N/A | Job worker |
| Job worker – Unregistered | Customer- For Sale | Intra state | Rs.50000 | Principal |
| Job worker – Unregistered | Customer- For Sale | Inter state | Limit N/A | Principal |
| Job worker place registered as Principal`s Additional place of business | Customer- For Sale | Intra state | Rs.50000 | Principal |
| Job worker place registered as Principal`s Additional place of business | Customer- For Sale | Inter state | Limit N/A | Principal |
Q.14 – Mention the GST return forms furnished for job work?
GST return filing is a mandatory compliance for both the parties involved in the supplies of goods (manufacturer and job worker). Form GSTR 1, GSTR 3B, etc, are filed based on their relevance to the process. Additionally, the principal manufacturer needs to file ITC-4 putting in all the details related to the supply/receiving of goods from the job worker.
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