JOB WORK : A brief note

[Ganeshan Kalyani]

A person who is carrying out the activity of manufacturing of goods may send his goods (inputs, semi-finished goods or capital goods) to another person who is having the facility of manufacturing the same goods. The becomes necessary to meet the additional demand in the market for that product.

A person who sends the goods to another person who does the processing work is called as principal. A person who receives the goods for the purpose of carrying out further process in it is called as a job worker. Job work means any treatment or processing that is being carried out by a job worker on goods belonging to the another person / principal. Job worker receives job work charges for the processing work carried out by him from the principal. The rate of tax applicable on the processing charges is given in the Notification No.11/2017-CT dated 28.06.2017.

The principal can send his inputs, semi-finished goods or capital goods to a job worker under the cover of a delivery challan. GST is not applicable as the transaction does not amounts to supply. E-way bill would be required if the value in the delivery challan exceeds ₹ 50,000/- or ₹ 1,00,000/-, as the case may be. The principal can also send the goods directly from his supplier's place to the job worker's place without being actually receiving it at his premises.

The principal can send the goods to another job worker from the first job worker's premises and to second job worker's and so on under the cover of delivery challan. Either the principal can raise a delivery challan or the job worker can raise it for effecting the movement of the goods to another job worker . The job worker must endorse the challan with the quantity of goods delivered to another job worker or to the principal. After the activity of processing is being done the job worker should return the goods to the principal under the cover of delivery challan within the prescribed time period.

The principal has to get back the inputs sent to the job worker within a period of one year from the date of dispatch of such inputs. Similarly, time limit to receive the capital goods back from the job worker is three years. However, such time period may be extended by one year for inputs and two years for capital goods by the Commissioner if a sufficient cause has been shown by the principal. The goods can also be supplied to the customers from the place of job worker.

If the goods are not received back from the job worker or if the same is not being supplied from the premises of the job worker, as per the provision it will be assumed that the principal has supplied those inputs and capital goods to the job worker at the time when such goods were dispatched and the value of said goods will be considered as an outward supply and tax will have to be paid by the principal.

However, the time limit of receiving the goods back as stated in above para is not applicable to moulds and dies, jigs and fixtures or tools.

The scrap generated out of processing activity at the job worker's premise can be supplied by the job worker himself or by the principal.

The principal has to furnish the details of the goods sent to the job worker and the details of the goods received back in the return GST ITC-04. The return is required to be filed quarterly on or before 25th of the following month of the quarter to which the details pertains.

CBIC has waived the requirement of filing of return in Form GST ITC-04 for the period from July, 2017 to March, 2019 vide Notification no. 38/2019-CT dated 31.08.2019. This waiver was with a condition that the principal shall furnish all the details of the goods which are sent to the job worker during the aforesaid periods but which has not been received or are not supplied as on 31.03.2019 in the return to be filed for April, 2019 to June, 2019.

The number of delivery challan generated during the month must be furnished in the GSTR-1 return.

The delivery challan must contain date and serial number, name, address and GSTIN of the principal, name address and GSTIN of the job worker, HSN, quantity of goods, taxable value, place of supply and the signature.

Recently, Circular 126/45/2019-GST dated 22.11.2019 was published by CBIC to clarify the GST rate applicable on the job work charges. It was clarified that the job work services i.e. services by way of treatment or processing undertaken by a person on goods belonging to another registered person (registered) attracts GST@ 12%. On the other hand the services which are carried out on physical inputs (goods) which are owned by persons other than those registered (unregistered) under the CGST Act. attract GST @18%. 

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