Clarification on issues related to Job Work (Happy GST series – 23) by CA Rajender Arora
Circular No.38/12/2018 Dated the 26th March, 2018 provides Clarification on issues
related to Job Work as follows:-
1. Define “job work”.
As per clause (68) of section 2 of the CGST Act, 2017, “job work” means any treatment
or process undertaken by a person on goods belonging to another registered person.
2. Define “Principal”.
The registered person on whose goods (inputs or capital goods) job work is performed
is called the “Principal” for the purposes of section 143 of the CGST Act.
3. Whether any inputs, other than the goods provided by the principal, can be used
by the job worker for providing the services of job work?
It is clarified that the job worker, in addition to the goods received from the principal,
can use his own goods for providing the services of job work.
4. Who is required to take registration, “Principal” or “job worker”?
For Principal - As per section 143 of the CGST Act, 2017, only a registered
person who can send the goods for job work. It is Principal‘s choice whether or
not to avail or not to avail of the benefit of these special provisions.
For Job worker - He is required to obtain registration only if his aggregate
turnover, to be computed on all India basis, in a financial year exceeds the
specified threshold limit, regardless of whether the principal and the job worker
are located in the same State or in different States.
5. Supply of goods from job worker’s place of business / premises shall be considered
as supply of?
It is clarified that the supply of goods by the principal from the place of business /
premises of the job worker will be regarded as supply by the principal and not by the
job worker as specified in section 143(1)(a) of the CGST Act.
6. How the moment of goods is made alongwith what documents are required to be
carried and how intimation is being done?
(i) Where goods are sent by principal to only one job worker: The principal
shall prepare challan as per rules 45 and 55 of the CGST Rules, 2017 in
triplicate. Two copies of the challan with goods sent to job worker. The job
worker should send one copy of the said challan along with the goods, while
returning them to the principal. The FORM GST ITC-04 will serve as the
intimation as envisaged under section 143 of the CGST Act, 2017.
(ii) Where goods are sent from one job worker to another job worker: In
such cases, the goods may move under the cover of a challan issued either
by the principal or the job worker. 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. The same process may be repeated for subsequent movement of
the goods to other job workers.
(iii) Where the goods are returned to the principal by the job worker: 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.
(iv) Where the goods are sent directly by the supplier to the job worker: The
goods may move 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 (i.e. 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. The
buyer (i.e., 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. In case of import, goods are supplied directly from the customs
station 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.
(v) Where goods are returned in piecemeal by the job worker: 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 and a fresh challan is
required to be issued by the job worker.
(vi) Submission of intimation: 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. The responsibility of keeping proper
accounts of the inputs and capital goods sent for job work lies with the
principal. The FORM GST ITC-04 will serve as the intimation as envisaged
under section 143 of the CGST Act.
7. How Liability to issue invoice, place of supply and payment of GST is determined?
(i) The Supply of job work services: The job worker is liable to pay GST if he
is liable to be registered. He shall issue an invoice at the time of supply of
the services as per section 13 read with section 31 of the CGST Act, 2017.
The value of services would be determined as per section 15 of the CGST Act
and would include service charges plus the value of any goods or services
used by him for supplying the job work services, if recovered from the
principal. 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.
(ii) Supply of goods by the principal from the place of business/premises of
job worker: Only if principal declares the job worker’s place of business /
premises as his additional place of business or if the job worker is
registered. The 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. Further, the invoice would have to be issued by
the principal. In case of exports, the LUT or bond, shall be executed by the
principal.
(iii) Supply of waste and scrap generated during the job work: Sub - section
(5) of Section 143 of the CGST Act provides that the waste and scrap
generated during the job work may be supplied by the registered job worker
directly from his place of business or by the principal in case the job worker
is not registered. The principles enunciated in para
(ii) above would apply
mutatis mutandis in this case.
8. What happens if conditions laid down under section 143 are violated?
If the inputs or capital goods are neither returned nor supplied from the job worker’s
place of business / premises within the specified time period, the principal would
issue an invoice and declare such supplies in his return for that particular month in
which the time period of one year / three years has expired. The date of supply shall
be the date on which such inputs or capital goods were initially sent to the job worker
and interest for the intervening period shall also be payable on the tax. If such goods
are returned by the job worker after the stipulated time period, the same would be
treated as a supply by the job worker to the principal and the job worker would be
liable to pay GST if he is registered. Further, moulds and dies, jigs and fixtures, are an
exception to this provision.
9. Whether input tax credit shall be available to the principal and job worker?
It is clarified that, in view of the provisions contained in clause (b) of sub-section (2) of
section 16 of the CGST Act, the input tax credit would be available to the principal,
irrespective of the fact whether the inputs or capital goods are directly received at the
job worker’s place of business/premises without being brought to the premises of the
principal or not. Also, job worker is eligible to avail ITC on inputs, etc. used by him in
supplying the job work services if he is registered.
Note: - It is to note that Circular No. 126/45/2019-GST Dated the 22nd November,
2019 is issued to provide – Clarification on scope of the notification entry at item (id),
related to job work, under heading 9988 of Notification No. 11/2017-Central Tax
(Rate) dated 28-06-2017-reg.
The point to be noted here is that Circular
No.38/12/2018 Dated the 26th March, 2018 read with the provisions of Section 143
of CGST Act, 2017 provides that Job work means for registered person only. Now if
goods are being sent to job worker that Job work means for registered person only.
Now if goods are being sent to job worker by unregistered person, then it shall not be
included in job work by virtue of interpretation of statues.
#gst #jobwork #ClarificationonissuesrelatedtoJobWork #clarificationonissues
