Job Work of Jewellery and Precious Metals Under GST

[Tushar Malik]

GST Applicability on Job Work

1. Taxability:
   • Under GST, job work is classified as a service.
   • The GST rate for job work in the jewellery sector is 5% (as per Notification No. 20/2017-Central Tax (Rate), dated 22nd August 2017).
2. Input Tax Credit (ITC):
   • The principal can claim ITC on GST paid for job work services, provided the goods are used for business purposes and meet eligibility criteria under the GST Act.
3. Valuation:
   • GST is calculated on the value of services provided by the job worker, which includes the job work charges agreed upon.

Movement of Goods for Job Work

1. Without Payment of GST:
   • Under Section 143 of the CGST Act, 2017, goods can be sent to the job worker without GST if:
     • Inputs are returned to the principal’s premises within one year, or capital goods within three years.
     • Alternatively, goods may be supplied directly from the job worker’s premises if the principal declares the job worker’s premises as an additional place of business in their GST registration.
2. Documentation:
   • A delivery challan must accompany goods moved for job work, containing:
     • Description of goods
     • Quantity
     • Value
     • GSTIN of the principal
     • Purpose of movement (e.g., job work)

Compliance Requirements for Job Work in Jewellery

1. Registration:
   • Job workers must register under GST if their aggregate turnover exceeds the applicable threshold (₹40 lakh/₹20 lakh, depending on the state).
2. Returns Filing:
   • The principal must report the movement of goods sent and received for job work in Form GST ITC-04.
3. Due Date for GST ITC-04 Filing:
   • Until September 2021: Quarterly filing, due by the 25th day of the succeeding month.
   • From October 2021:
     • Annual Aggregate Turnover > ₹5 crore: Half-yearly filing (April-September: due by 25th October, October-March: due by 25th April).
     • Annual Aggregate Turnover ≤ ₹5 crore: Yearly filing (due by 25th April for the financial year).

Key Considerations

1. Waste and Scrap:
   • Waste or scrap generated during job work belongs to the principal unless agreed otherwise. Its disposal must comply with GST provisions, and tax liability may arise.
2. E-Way Bill Requirement:
   • As per Notification No. CGST 38/2023, dated 4th August 2023, an e-way bill is required for transporting gold and precious metals valued at ₹2 lakh or more within a state if notified by respective state/UT laws.
3. Direct Supply from Job Worker’s Premises:
   • Goods can be supplied directly from the job worker’s premises to customers without returning to the principal if the job worker’s premises are included in the principal’s GST registration.

Challenges in the Jewellery Sector

1. High-Value Goods:
   • The high value of jewellery necessitates precise documentation and enhanced security during transit.
2. Frequent Law Amendments:
   • The jewellery industry must stay updated with frequent changes in GST rules to ensure compliance.

Conclusion

Job work plays a vital role in the jewellery and precious metals sector. Ensuring GST compliance, including proper documentation and adherence to timelines, is critical to avoid penalties and operational disruptions. Businesses should consider consulting a GST expert for guidance on complex issues or ambiguities to manage their GST obligations effectively.