Job Work under GST – All You Need To Know

Job-work sector constitutes a significant industry in Indian economy. It includes outsourced activities that may or may not culminate into manufacture. The term Job-work itself explains the meaning. It is processing of goods supplied by the principal. The concept of job-work already exists in Central Excise, wherein a principal manufacturer can send inputs or semi-finished goods to a job worker for further processing.

Many facilities, procedural concessions have been given to the job workers as well as the principal supplier who sends goods for job-work. The whole idea is to make the principal responsible for meeting compliances on behalf of the job-worker on the goods processed by him (job-worker), considering the fact that typically the job-workers are small persons who are unable to comply with the discrete provisions of the law.

Meaning of Job Work

‘Any treatment or process undertaken by a person on goods belonging to another registered person’. The one who does the said job would be termed as ‘job worker’.

That means the ownership of the goods is rest in the hands of principal and the job worker is responsible to do the process work on the goods specified by the principal.

What Are the Procedural Aspects of Job Work ?

• The principal can send the invoices/capital goods to the job worker under certain terms & conditions without payment of tax and after completion of work he can bring back such goods without payment of tax.
• The principal can also transfer his goods/invoices to the job worker without bringing them for his premises and can still benefit the credit of tax paid on such goods/invoices.
• The job worker is required  to be returned the goods/invoices to the principal within 1 – 3 years from the date of the receipt of such goods/invoices.
• After processing of goods, the job-worker may clear the goods to-
• Another job-worker for further processing
• Dispatch the goods to any of the place of business of the principal without payment of tax
• Remove the goods on payment of tax within India or without payment of tax for export outside India on fulfilment of conditions.

Input Tax Credit on goods supplied to job worker

As per sec 19 of the CGST Act 2017, the principle has the responsibility to take the credit of input tax on the inputs sent to the job worker for a job work.

And also the principal can take the credit even when the goods have been directly supplied to the job-worker without being brought into the premise of the principal.

What is the Time Limits for the Return of Processed Goods ?

• According to sec 19 of the CGST Act 2017 the processed goods shall be returned to the principal within 1-3 years by the job worker.
• the provision of return of goods is not applicable in case of moulds and dies, jigs and fixtures or tools supplied by the principal to job-worker.

What is the Extended Meaning of Input ?

As per sec 143 of the CGST Act 2017 where certain process is carried out on the input before removal of the same to the jobworker, such product after carrying out the process is to be referred as the intermediate product. Such intermediate product can also be removed without payment of tax.That means both intermediate and input products can be cleared without payment of duty to job worker.

What are Waste Cleaning Provisions ?

• As per sec 143(5) of the CGST Act 2017 , if the job worker is registered , the waste generated during the time of processing  he may be directly supplied from his place of business on payment of tax.
• In the case of registered job workers the waste may be cleared by the principal.

What are the Transitional Provisions under Job Work ?

• If the inputs are sent to the job worker before the introduction of GST under the provisions of existing law , then such goods are returned within 6 months from the appointed day, in this case no tax would be payable. If such goods are not returned within prescribed time, the input tax credit availed on such goods will be liable to be recovered.
• If the manufactured goods are removed, prior to the appointed day, without payment of duty for testing or any other process which does not amount to manufacture, and such goods are returned within 6 months from the appointed day, then no tax will be
• The principal and the job worker are required to declare the details regarding the transaction of input/goods for job work in the prescribed format GSTRN-I within 90 days of the introduction of GST.

Read the full text of the Concept Note below.