Understanding Job Work Under GST

Job work is the process of transforming raw materials or semi-finished goods provided by the principal manufacturer. This transformation completes a part or the entire manufacturing or finishing process. Here, a principal manufacturer sends inputs or semi-finished goods to a job worker for further processing to job worker. The principal is responsible for ensuring that the job worker complies with regulations when processing goods. This is important because job workers are typically small-scale operators who may struggle to adhere to all the legal requirements. In this article, we will explain to you what Job work in GST means and elaborate on our discussion of both the Job work procedures in GST.

Job Work

Section 2(68) of the CGST Act, 2017 defines a job worker as a person, whether registered or unregistered, who undertakes any treatment or process on goods belonging to another registered person. The owner of the goods is referred to as the principal in this context, and it's important to note that the ownership of the goods does not transfer to the job worker. The job worker is obligated to carry out the specific process specified by the principal on the goods.

Responsibilities of 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.
• Principal shall file ITC-04 on or before the 25th day of the month succeeding the quarter. where the turnover of the principal during the immediately preceding financial year exceeds five crores otherwise ITC-04 will be filed on a yearly basis.

Time limit for the principal manufacturer to receive back the goods

Inputs and/or capital goods sent to a job worker are required to be returned to the principal within 1 year and 3 years, respectively, from the date of sending such goods to the job worker.

Various machinery sent to the job worker to carry out the job work

The time limits will not apply to items like moulds and die, jigs and fixtures, or tools sent out to a job worker for carrying out the job work.

If the goods are not received within the specified time

As per section 19 of CGST Act 2017, In case goods are not received within the period mentioned above, such goods will be deemed as supply from the effective date. The principal manufacturer will have to pay tax on such deemed supply. The challan issued will be treated as an invoice for such supply.

Goods that the principal can directly sell from the job worker’s place

The principal manufacturer can supply the goods from the place of business of a job worker only if the principal declares such a place of business as an additional place of business. However, there are exceptions to this rule :

• The job worker is registered.
• The principal supplies goods that are specifically notified by the Commissioner to be allowed to be sold directly from the job worker’s place.

Conditions for claiming ITC on goods sent for job work

As per section 19 of CGST Act 2017, the principal shall take credit of input tax on inputs if goods sent to job worker :

• From the principal place of business.
• Directly from the place of supply of the supplier of such goods.

The effective date for goods sent depends on the place of business :

• Sent from principal’s place of business- Date of goods sent out.
• Send directly from the place of supply of the supplier of such goods- Date of receipt by job worker.

Form ITC-04

Form GST ITC-04 must be submitted by the principal every quarter. They must include the details of challenges regarding the following :

• Goods dispatched to a job worker or
• Received from a job worker or
• Sent from one job worker to another.

There are two parts of ITC-04

• Goods sent to job workers

Various details must be mentioned such as GSTIN, challan number, tax amount, etc. All details will be available from the challans.

• Goods received back from the job workers

The goods may be received by the principal or sent to another job worker directly from the first job worker’s place of business. All details of original challans and new challans must be mentioned.

Special provisions for job workers & filing

Where the job worker sends goods from to another job worker, the same conditions shall apply as the principal manufacturer. Accordingly, the job worker can endorse the challan issued by the principal to indicate the quantity and description of goods when he sends goods to another job worker. The job worker must file GSTR-1 and GSTR-3B like any other taxpayer.

Written By - Neeti Singh

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