JOB WORK PROCEDURES

[CA.VINOD CHAURASIA]

JOB WORK PROCEDURES

Introduction: This article discusses in detail about Job work procedures including the following:

• Concept of Job work
• Registration & its nature
• Job work procedures under GST
• Related ITC provisions & rules
• Monthly & Quarterly Reporting and
• Transition provisions.

What is Job work ?

As per section 2(68) of CGST Act, “Job work” means any treatment or process undertaken by a person on goods belonging to another registered person.

 Who is Job worker ?

 Job worker is a person who is treating or processing the goods belonging to other person. The job worker is required to carry out the process specified by the owner on the goods.

Who is Principal or Manufacturer ?

The registered person to whom these goods belong is called ‘Principal’ or Manufacturer. He is real owner of the goods. The ownership of the goods does not transfer to the job-worker but it rests with the principal.

• A manufacturer may send out his goods to a job worker for an initial process, intermediate process, assembly, packaging or any other completion process & later may supply such goods to its customers or use in any other his manufacturing process.
• The goods sent for job work may be raw material, components parts, semi finished goods & even finished goods.
• The resultant goods could be with the same characteristics or with the variations of the product sent for job work.

Registration

• ‘Job work’ has been considered to be a service as per the point 3 of schedule II of CGST Act.
• A ‘job worker’ is required to obtain registration if his aggregate turnover of his services exceeds the prescribed threshold (i.e ₹ 20 Lakhs / ₹ 10 Lakhs).  (Sec. 22)
• The value of goods or services used by the job worker for carrying out the job work shall be included in the value of services supplied by the job worker.
• The value of outward supply made by the principal directly from the job worker’s premises shall be included in the aggregate turnover of the principal.

Job work procedure – Sec. 143

1.  A registered person (i.e. “Principal”) may send any inputs,  or capital goods, without payment of tax, to a job worker for job work and from there to subsequent job worker and likewise and shall:

a)  bring back to any of his business place without payment of tax:

1. Capital Goods other than mould & dies, Jigs & fixtures, or tools -  within 3 years;
2. Input Goods- within 1 year

or

b) after completion of job work, he may supply the finished goods directly from the place of business of job worker on payment of tax within India or export them with or without payment of tax, provided that: 

Principal has to declare the place of business of the job worker as his additional place of business except where -

1.  The job worker is registered u/s 25; or
2.  The “Principal” is engaged in supply of such goods as may notified by the Commissioner.

2.  It is the responsibility of  “Principal” to keep &  maintain proper books and accounts for goods sent on job work.

3.   If the inputs or capital goods are:

• not received back; or
• supplied / sold from the premises of the job worker

by the principal within the time limit prescribed as above, then it shall be deemed to have been supplied by the principal to the job worker on the FIRST Day when such goods sent out.

{However, this condition does not apply to moulds and dies, jigs and fixtures or tools sent to a job worker for job work . Section 19(7)}

4.   Any waste and scrap generated during job work may be supplied by:

1.  directly the job worker from his place of business on payment of tax, if such job worker is registered;    or

b)  directly by the principal, if such job worker is not registered;

5.  The word “input” includes intermediate or semi finished goods arising from any treatment or process carried out by the principal or any other the job worker.(explanation to section 143)

Input tax credit in respect of inputs or capital goods sent for job work

As per section 19, the principle can take ITC in respect of inputs, semi finished goods or capital goods sent to job worker:

1. from principal’s own place of business; or
2. directly  from the place of the supplier of such goods without  being first received at the premises of the principal. The principal need not wait till the inputs are first brought to his place of business.

But, 4 conditions as specified under rule 45 are to be complied with

Condition 1 – Delivery Challan (Rule -55)

The inputs or capital goods shall be sent to the job worker under the cover of a delivery challan issued by the principal.

The challan shall be issued even for the inputs or capital goods directly sent to the job worker

Condition 2 – Details in delivery challan (Rule -55)

The goods shall be sent under cover note  of delivery challan containing below details:

1. date and number of the delivery challan
2. name, address and GSTIN of the consigner and consignee
3. HSN code, description and quantity of goods
4. Taxable value, tax rate, tax amount- CGST, SGST, IGST, UTT separately
5. Place of supply and
6. Signature

Condition 3 – Reporting

• Monthly reporting in GSTR-1 in table no. 13 by the 10^th of next month

• total number of delivery challans issued for job work
• their serial nos.( from - to)
• No. of cancelled delivery challans
• Net no. of challans issued

• Quarterly reporting in ITC-04 by 25^th of next month following the quarter ended.

• Details of goods / capital goods sent to job worker
• Details of goods / capital goods received back from job worker
• Details of goods / capital goods sent out to another job worker from the business place of job worker.
• Invoice details of outward supplies made from the business place of job worker.

Condition 4

 The inputs or capital goods sent to job worker, must be received back or otherwise supplied by the principal manufacture from the premises of job worker within the following period:

1. Capital other than mould & dies, Jigs & fixtures, or tools -  within 3 years;
2. Input Goods- within 1 year

from date of being send out or receipt by job worker (Sec 143).

Effective date for goods send depends on place of business:

1. If sent from principal’s place of business- Date of goods send out
2. If sent directly from the place of supply of the supplier of such good- Date of receipt by job worker.

If the inputs or capital goods are not returned to the principal or otherwise supplied by the principal with in time as per section 143, such inputs or capital goods will be treated as supply from effective date and tax will be payable on such deemed supply and the challan issued will be treated as an invoice for such supply and such supply shall be declared in FORM GSTR-1 and the principal shall be liable to pay tax along with interest.

Transitional provisions for  relating to Job work-Sec 141 & Rule-119

1. As per section 141, if Inputs / semi-finished goods are sent to the job worker in accordance with the provisions of the existing law before the appointed day and the job worker returns the same within 6 months from the appointed day (or within the extended period of maximum 2 months), then no tax is payable.

2. If such goods are not returned within prescribed time of 6 months (or within extended period of maximum 2 months), then input tax credit availed will be recovered as per sec. 142(8)(a).

3.    However, no tax as above is not payable, if both the manufacture and the job worker declare the details of the input or goods held in stock by the job worker on  behalf of the manufacturer on the appointed day i.e. 01/07/2017 in FORM GST TRAN-1  within 90 days {sec. 141(4)}

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The author is a practising CA based in Delhi and is registered Insolvency Professional. He can be reached at cavinodchaurasia@gmail.com , Mob. +91 9953587496.