Job Work under GST in India

Job Work under GST in India-Rates, Time, Process

GST CONCEPT AND STATUS

Job Work is a very important process to change the raw material or semi-finished goods into Finished goods. so you need to know all about job work accounting under the GST system in India. In this post, We are going to know about accounting treatment, work process, Registration, Documentation, Valuation of Job work, Itc, Rate of GST, Timing and limits, etc.

Job Work is a process or treatment performed by a person (Job worker) on raw material or semi-finished goods to change into the finished goods for use. The principal means a registered person on whose goods (input or capital goods) job work is performed. And Job worker means such person who performs such process or treatment on raw material or semi-finished goods received from the principal registered person.

What is Job work?

According to the definition, Job work means any treatment or process is undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly. Treatment or processes include packing, labeling, testing, re-conditioning, re-packing, inspection, etc. And any treatment or process applied to another person’s goods is to be treated as a supply of services.

What is the meaning of Job work, Principal, and Job worker?

  1. Job Work– Job Work is a process or treatment performed by a person (Job worker) on raw material or semi-finished goods to change into the finished goods for use.
  2. Principal– The principal means a registered person on whose goods (input or capital goods) job work is performed.
  3. Job Worker-Job worker means such person who performs such process or treatment on raw material or semi-finished goods received from the principal registered person.

What is the procedure of Job Work?

These are the steps of the job work procedure under GST in India

1. Goods sent to a job worker: The principal may send any inputs or capital goods, without payment of
tax, to a job worker for job-work and from there subsequently send to another job worker and likewise, and shall:

  1. Bring back to place of business: Bring back after completion of job work or otherwise, without payment of tax within following period of their being sent out:
  2. Supply of inputs or capital goods: Supply after completion of job work or otherwise, of their being sent out from the place of business of a job worker on payment of tax within India or with/without payment of tax for export, as the case may be within the following period:
Inputs1 year
Capital goods other than molds and dies, jigs and fixtures or tools3 year

2. Supply of goods from the place of business of job-worker: The principal may supply the goods from the lace of business of a job worker if he declares the place of business of the job-worker as his additional place of business except in a case:

  • Where the job worker is registered under Sec. 25; or
  • Where the principal is engaged in the supply of such goods as may be notified by the Commissioner.

3. Supply of waste or scrap generate: Any waste and scrap generated during the job work may be supplied by a registered job worker directly from his place of business on payment of tax or by the principal (if the job worker is not registered)

4. Maintenance of accounts: Responsibility for keeping proper accounts for the inputs or capital goods shall be that of principal.

5. Deemed supply in case of job-work:

If inputs are not brought back or supplied1 year
If capital goods are not brought back or supplied3 year

What are the Requirements of Registration for job work under GST?

  1. The threshold for registration: Every supplier shall be liable to be registered under the CGST Act in the State or Union territory, from where he makes a taxable supply of goods or services or both if his aggregate turnover in an F.Y. exceeds Rs. 20 lacs (Rs. 10 lacs in the Special Category States).
  2. Exclusion from aggregate turnover: The supply of goods, after completion of job-work, by a registered job worker shall be treated as the supply of goods by the principal referred to in S. 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker.
  3. Exemption notification: Job-workers making an inter-State supply of services to a registered person are exempted from obtaining registration vide NN-07/2017 –Integrated Tax, dated 14-Sep-2017

What are the legal documents required in Job Work?

This is the list of documents required in job work under different circumstances-

  1. Issuance of challan: The inputs, semi-finished goods, or capital goods shall be sent to the job worker under the cover of a challan issued by the principal, including where such goods are sent directly to a job-worker and where the goods are sent from one job worker to another job worker, the challan may be issued either by the principal or the job worker sending the goods to another job worker.
  2. Endorsement of challan: The challan issued by the principal may be endorsed by the job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal. Provided further that the challan endorsed by the job worker may be further endorsed by another job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal.
  3. Contents of delivery challan: The challan issued by the principal to the job worker shall contain the details specified in rule 55.
    1. Date and number of the delivery challan;
    2. Name, address and GSTIN of the consigner, if registered;
    3. Name, address and GSTIN or Unique Identity Number of the consignee, if registered;
    4. HSN code and description of goods;
    5. Quantity (provisional, where the exact quantity being supplied is not known);
    6. Taxable value;
    7. Tax rate and tax amount-central tax, State tax, integrated tax, Union territory tax or cess, where the transportation is for supply to the consignee;
    8. Place of supply, in case of inter-State movement; and
    9. Signature
  4. Time limit for filing ITC-04: The details of challans in respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another during a quarter shall be included in FORM GST ITC- 04 furnished for that period on or before the twenty –fifth day of the month succeeding the said quarter or within such further period as may be extended by the Commissioner by a notification in this behalf. Provided that any extension of the time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.

• Deemed supply if goods not returned within the specified time: Where the inputs or capital goods are not returned to the principal within the time stipulated in S. 143, it shall be deemed that such inputs or capital goods had been supplied by the principal to the job worker on the day when the said inputs or capital goods were sent out and the said supply shall be declared in FORM GSTR-1 and the principal shall be liable to pay the tax along with applicable interest.

What are the legal documents required in Job Work for Transportation?

These are the legal documents required in Job Work for Transportation-

1. Issue of delivery challan: For the purposes of transportation of goods for job work, the consigner may issue a delivery challan, serially numbered not exceeding 16 characters, in one or multiple series, in lieu of invoice at the time of removal of goods for transportation.

2. Particulars of delivery challan:

  1. Date and number of the delivery challan;
  2. Name, address and GSTIN of the consigner, if registered;
  3. Name, address and GSTIN or Unique Identity Number of the consignee, if registered;
  4. HSN code and description of goods;
  5. Quantity (provisional, where the exact quantity being supplied is not known);
  6. Taxable value;
  7. Tax rate and tax amount-central tax, State tax, integrated tax, Union territory tax or cess, where the transportation is for supply to the consignee;
  8. Place of supply, in case of inter-State movement; and
  9. Signature

3. Manner of preparation of delivery challan: The delivery challan shall be prepared in triplicate, in case of a supply of goods, in the following manner, namely:-
(a) the original copy being marked as ORIGINAL FOR CONSIGNEE;
(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNER
Where goods are being transported on a delivery challan in lieu of invoice, the same shall be declared as specified in rule 138.

4. E-way bill requirement in case of job-work-Where goods is sent by a principal located in one State or Union territory to a job worker located in any other State or Union territory, the e-way bill shall be generated by the principal or the job worker, if registered, irrespective of the value of the consignment.

Further Clarification regarding issues related to job work

Clarification regarding issues related to job work is provided below

Can a Job worker use his own goods for providing services of job work?

It is clarified that the job workers, in addition to the goods received from the principal, can use their own goods for providing the services of job work.

Requirement of registration for the principal/job worker

It is only a registered person who can send the goods for job work under the said provisions. The job worker is required to obtain registration only if his aggregate turnover, to be computed on an India basis, in an FY exceeds the specified threshold limit (i.e. Rs. 20 lakhs).

Movement of Goods-Where goods are sent by principal to only one job worker

  1. The principal shall prepare in triplicate, the challan in terms of rules 45 and 55 of the CGST Rules, for sending the goods to a job worker.
  2. Two copies of the challan may be sent to the job worker along with the goods.
  3. The job worker should send one copy of the said challan along with the goods while returning them to the principal.
  4. The FORM GST ITC-04 will serve as the intimation as envisaged under Sec. 143 of the CGST Act, 2017.

Movement of Goods- Where goods are sent from one job worker to another job worker

  1. In such cases, the goods may move under the cover of a challan issued either by the principal or the job worker.
  2. In the alternative, the challan issued by the principal may be endorsed by the job worker sending the goods to another job worker, indicating therein the quantity and description of goods being sent.
  3. The same process may be repeated for subsequent movement of the goods to other job workers.

Movement of Goods- Where the goods are returned to the principal by the job workers:

  1. The job worker should send one copy of the challan received by him from the principal while returning the goods to the principal after carrying out the job work

Movement of Goods- Where the goods are sent directly by the supplier to the job worker:

  1. In this case, the goods may move from the place of business of the supplier to the place of business/premises of the job worker with a copy of the invoice issued by the supplier in the name of the buyer(the principal) wherein the job worker’s name and address should also be mentioned as the consignee, in terms of rule 46(o) of the CGST Rules.
  2. The buyer(the principal)shall issue the challan under rule 45 of the CGST Rules and send the same to the job worker directly in terms of para(i) above.
  3. In case of import of goods by the principal which are then supplied directly from the customs station of import, the goods may move from the customs station of import to the place of business/premises of the job worker with a copy of the Bill of Entry and the principal shall issue the challan under rule 45 of the CGST Rules and send the same to the job worker directly.

Movement of goods- Where goods are returned in piecemeal by the job worker:

  1. In case the goods after carrying out the job work, are sent in piecemeal quantities by a job worker to another job worker or to the principal, the challan issued originally by the principal cannot be endorsed.
  2. And a fresh challan is required to be issued by the job worker.

Supply of job work services

  1. The job worker, as a supplier of services, is liable to pay GST if he is liable to be registered.
  2. He shall issue an invoice at the time of supply of the services as determined in terms of S. 13 read with S. 31 of the CGST Act.
  3. The value of services would be determined in terms of S. 15 of the CGST Act
  4. And would include not only the service charges but also the value of any goods or services used by him for supplying the job work services if recovered from the principal.

Moulds and dies, jigs and fixtures or tools provided by principal

  1. Doubts have been raised whether the value of molds and dies, jigs and fixtures, or tools which have been provided by the principal to the job worker and have been used by the later for providing job work services would be included in the value of job work services.
  2. Sec 15(2) (b) of the CGST Act provides that any amount that the supplier is liable to pay in relation to the supply but which has been incurred by the recipient will form part of the valuation for that particular supply, provided it has not been included in the price for such supply.
  3. Accordingly, it is clarified that the value of such moulds and dies, jigs and fixtures or tools may not be included in the value of job work services provided its value has been factored in the price for the supply of such services by the job worker.

Supply of goods by the principal from the place of business/premises of job worker:

  1. Sec.143 of the CGST Act provides that the principal may supply from the place of business/premises of a job worker, inputs after completion of job work or otherwise or capital goods (other than moulds and dies, jigs and fixtures or tools) within 1 year or 3 years respectively of their being sent out, on payment of tax within India, or with or without payment of tax for exports, as the case may be.
  2. This facility is available to the principal only if he declares the job worker’s place of business/premises as his additional place of business or if the job worker is registered.
  3. Since the supply is being made by the principal it is clarified that the time, value and place of supply would have to be determined in the hands of the principal irrespective of the location of the job worker’s place of business/premises.
  4. Further, the invoice would have to be issued by the principal. It is also clarified that in case of exports directly from the job worker’s place of business/premises, the LUT or bond, as the case may be, shall be executed by the principal.

Waste and scrap

  1. If the job worker is registered then Job worker may supply the scrap along with payment under GST.
  2. If job worker is not registered but job worker premises added as additional Place of business then Principal can supply Waste or scrap from job worker Place directly or job worker Will return scrap to principal and he will supply from his premises.

Whom to furnish intimation Return under form ITC-04?

  1. Rule 45(3) of the CGST Rules provides that the principal is required to furnish the details of challans in respect of goods sent to a job worker or received from a job worker or sent from one job worker to another job worker during a quarter in FORM GST ITC -04 by the 25th day of the month succeeding the quarter or within such period as may be extended by the Commissioner.
  2. It is clarified that it is the responsibility of the principal to include the details of all the challan relating to foods sent by him to one or more job worker or from one job worker to another and its return there from .
  3. The FORM GST ITC-04 will serve as the intimation as envisaged under Sec.143 of the CGST Act.

As per latest update on 24th Sept 2021
With effect from 1st October 2021, the frequency of filing the ITC-04 form has been revised through the Central Tax notification number 35/2021 dated 24th September 2021, as follows-
(1) Those with AATO more than Rs.5 crore – Half-yearly from April-September- due on 25th October and October-March due on 25th April.
(2) Those with AATO up to Rs.5 crore – Yearly from FY 2021-22 due on 25th April.

1st May 2021
ITC-04 for the quarter January-March 2021 is extended from 25th April 2021 up to 31st May 2021.

What is the GST rate for job work?

The GST rate is reduced to 12% from 18% for job work other than those specifically provided by notification.

Rates chart summary

  1. Rate of GST 1.5% on supply of job work services in relation to diamonds
  2. Rate of GST 18% on supply of job work services in relation to bus bodybuilding
  3. And Rate of GST 12% on supply of job work services other than provided above.

Further faqs related to job work

How goods can be sent for job work under GST?

The person registered under GST may send inputs(raw material), capital goods, or semi-finished goods to a job worker for doing job work. The person sending material for job work may take these goods out by paying GST or without paying GST also.

Is a job worker required to take registration?

Yes, as job work is a service, the job worker would be required to obtain registration if his aggregate turnover exceeds the prescribed threshold.

What is the SAC code for Job Work Service?

The job work is a service activity carried out on behalf of the manufacturer and the input is owned by the supplier. Therefore, the HSN code for job work will be a Service Accounting Code(SAC). Here are some of the services that fall under 9988 SAC.

What is a job work agreement?

A job works agreement is entered into between the job worker and the principal manufacturer to regulate the process of converting unfinished goods into finished goods by the job worker on the performance of specific job work.

What is the Job work definition as per 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 a ‘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.

What are the contents of Form ITC-4?

Form ITC 4 is the requirement by the Principal Manufacturer and the format includes information such as;
1. List of Goods delivered to Job Workers or received from them
2. The goods sent from one Job Worker to another due to finishing requirements
3. Goods received back from the Job Worker
4. Details of the job worker to whom the goods are transferred from the prior job worker

Mention the GST return forms furnished in 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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