Taxation of Job Work in GST Law

What is Job Work ?

The term “Job Work” is defined in section 2(62) of Model GST Law as undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “Job Worker” shall be construed accordingly.

The above definition has been enhanced which includes any treatment or process which will also cover repairs, calibration, testing etc. etc. At present scenario the Job Work has been defined in Central Excise Law as “Job Work” means processing or working upon of raw material or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for aforesaid process and the expression “job worker” shall be construed accordingly.

Special procedure for removal of goods for Certain Purposes under GST Law

(1) The Commissioner may, by special order and subject to conditions as may be specified by him, permit a registered taxable person (hereinafter referred to in this section as the “principal”) to send taxable goods, without payment of tax, to a job worker for job-work and from there subsequently send to another job worker and
likewise, and may, after completion of job-work, allow to-

(a) bring back such goods to any of his place of business, without payment of tax, for supply therefrom on payment of tax within India, or with or without payment of tax for export, as the case may be, or

(b) supply such goods from the place of business of a job-worker on payment of tax within India, or with or without payment of tax for export, as the case may be:
Provided that the goods shall not be permitted to be supplied from the place of business of a job worker in terms of clause (b) unless the “principal” declares the place of business of the job-worker as his additional place of business except in a case-

(i) where the job worker is registered under section 19; or
(ii) where the “principal” is engaged in the supply of such goods as may be notified in this behalf.

(2) The responsibility for accountability of the goods including payment of tax thereon shall lie with the “principal”.

Manner of Taking Input Tax Credit in respect of inputs sent for job work

(1) The “principal” referred to in section 43 A shall, subject to such conditions and restrictions as may be prescribed, be entitled to take credit of input tax on inputs sent to a job-worker for job-work if the said inputs, after completion of job-work, are received back by him within one hundred and eighty days of their being sent out:

Provided that the “principal” shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job-work without their being first brought to his place of business, and in such a case, the period of one hundred and eighty days shall be counted from the date of receipt of the inputs by the job worker.

(2) The “principal” shall, subject to such conditions and restrictions as may be prescribed, be entitled to take credit of input tax on capital goods sent to a job-worker for job-work if the said capital goods, after completion of job-work, are received back by him within two years of their being sent out:

Provided that the “principal” shall be entitled to take credit of input tax on capital goods even if the capital goods are directly sent to a job worker for job-work without their being first brought to his place of business, and in such a case, the period of two years shall be counted from the date of receipt of the capital goods by the job worker.

(3) Where the inputs or capital goods, as the case may be, are not received back by the “principal” within the time specified under sub-section (1) or under sub-section (2), as the case may be, he shall pay an amount equivalent to the input tax credit availed of on the said inputs or capital goods, as the case may be, along with interest specified under sub-section (1) of section 36:

Provided that the said “principal” may reclaim the input tax credit and interest paid earlier when the inputs or capital goods, as the case may be, are received back by him at his place of business.

 

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FAQs on Job Work as released by CBEC (Download FAQs on Job Work)

Q 1. What is job-work?

Ans. Section 2(62) of the MGL provides that “job-work” means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job-worker” shall be construed accordingly.

This definition is much wider than the one given in Notification No. 214/86 – CE dated 23rd March, 1986 as amended, wherein job-work has been defined in such a manner so as to ensure that the activity of job-work must amount to manufacture. Thus the definition of Job Work itself reflects the change in basic scheme of taxation relating to job-work in the proposed GST regime.

Q 2. Whether goods sent by a taxable person to a Job Worker will be treated as supply and liable to GST? Why?

Ans. No. It will not be treated as a supply. In terms of proviso to Para 5 of Schedule I of the MGL the supply of goods by a registered taxable person (principal) to Job Work, in terms of Section 43A, shall not be regarded as supply of goods. Therefore, it can be inferred that no GST shall be applicable on the goods supplied by the registered principal to a job-worker.

Q 3. Can a registered taxable person send goods without payment of tax to his Job Worker?

Ans. Yes. Section 43A of the MGL provides that the registered taxable person (principal) can send the taxable 86 goods to a job-worker for job-work without payment of tax. He can further send the goods from one job-worker to another job-worker and so on subject to certain condition.

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It may be noted that provisions of Section 43A are not applicable if non-taxable or exempted goods are proposed to be sent for job-work.

Q 4. Is a job-worker required to take registration?

Ans. Yes, as a Job-worker would be a supplier of services, he would be required to obtain registration if his aggregate turnover exceeds the prescribed threshold.

Q 5. Whether the goods of principal directly supplied from the job-worker’s premises will be included in the aggregate turnover of the Job Worker?

Ans. No. It will be included in the aggregate turnover of the principal.

Q 6. Can the principal supply the goods directly from the premises of the job-worker without bringing it back to his own premises?

Ans. Yes but with a rider that the principal should have declared the premises of such job-worker as his additional place of business or where the job-worker is a registered person or where the goods have been notified.

Q 7. Under what circumstances can the principal directly supply goods from the premises of Job Worker?

Ans. The goods can be supplied directly from the place of business of job-worker without declaring it as additional place of business in two circumstances namely where the job-worker is a registered taxable person or where the principal is engaged in supply of such goods as may be notified in this behalf.

Q 8. What are the provisions concerning taking of ITC in respect of inputs/capital goods sent to a Job Worker?

Ans. In the MGL, aspects relating to taking input tax credit in respect of inputs/capital goods sent for job-work have been specifically dealt in Section 16A, which provides that the credit of taxes paid on inputs or capital goods can be taken in the following manner:

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Principal shall be entitled to take credit of inputs sent to a job-worker if the said inputs, after completion of job-work are received back in 180 days from the date of being sent out. In case the inputs are sent directly to the job-worker, the date shall be counted from the date of receipt of inputs by job-worker. Further an amount equivalent to the input tax credit availed on such inputs has to be paid along with interest, in case the inputs are not received back within the specified time. The credit can be reclaimed when the inputs are actually received back.

Q 9. Are the provisions of job-work applicable to all category of goods?

Ans. No. The provisions relating to job-work are applicable only when registered taxable person intends to send taxable goods. In other words, these provisions are not applicable to exempted or non-taxable goods or when the sender is a person other than registered taxable person.

Q 10. Whether the goods will be permitted to be supplied from the place of business of a job worker?

Ans. Yes. But only in cases where the job worker is registered or the principal declares the place of business of the job worker as his additional place of business.

Q 11. Whether the job worker will have to be compulsorily registered?

Ans. No. Section 43A of MGL does not prescribe any such condition.